Nigeria Exports Two Million Jobs To China With the Textile Industry Dysfunction, By Paul Alaje
We cannot pretend that all is well; protection of the textile industry must take a high priority on the government’s agenda. Nigeria state will need to renegotiate the agreement signed in 1997 for the liberalisation of the textile market, which has done more harm than good.
Kaduna Textile Mill Limited was established in 1956. It was the first modern textile mill, not just in Nigeria but all over West Africa. The gigantic factory was built with $2,500,000, according to available information. Within a short space of time, other groups, public and private, joined the industry, notably Arewa Textile PLC, Nortex Nigeria Limited, Finetex Limited, and United Nigeria Textile PLC, etc. All were in Kaduna. Today only one of them is struggling to survive. The others had long laid off their workers, thereby populating the legion of persons searching for jobs in Nigeria’s ever crowded labour market.
Nigeria had over 200 functional factories in the 1980s, producing fabrics for the local and international markets. This is however not the case three decades after. For instance, the industry once created 500,000 direct jobs in the 1980s and about two million indirectly at that time. Up till the 80s, Nigeria generated $2 billion naira annually as revenue from the textiles industry. And, between 1985 and 1991, the industry grew by an average of 65 percent annually. The textile subsector was responsible for 25 percent of the entire manufacturing sector in Nigeria. The subsector was a national pride then!
There were other textile mills, mainly in Lagos, such as International Textile Ltd and First Spinner Ltd, etc. We had factories in Kano and Ibadan also. However, today, most of the factories have shut down due to frustration, poor protection, mismanagement, smuggling, little or no access to funds, power instability, and the high cost of inputs.
The textiles sub-sector, which had factories scattered all over the country a few decades ago and were busy producing for endless domestic demands, were then the highest employers of labour after government.
Unfortunately the Nigerian state decided to sign a treaty in 1997, which had a very negative impact on the economy at large. Just a few months after the treaty, in spite of warnings sent to the then Abacha regime, Nigerian ports were littered with relatively cheaper imported fabrics. The implication was massive; these imports started destroying the huge success already attained by the Nigerian textiles industry, with its effects immediately felt in Kaduna. Factories started shutting down in the North, notably in Kaduna and Kano. Not too long thereafter, the other factories in different parts of Nigeria realised that they could no longer cover their average variable costs. While smuggling took a different turn, there began an upsurge in textile importation. The new twist in early 2000 was the emergence of the counterfeit cartel, which usually picked a sample from Nigeria and reproduced the same as low quality variants abroad. They then imported this and sold to unsuspecting members of the public at cheaper prices, compared to local manufacturers’ prices. The counterfeit industry is a multi-billion naira industry in Nigeria today.
Besides the World Trade Organisation (WTO) policy of liberalisation and the unfavourable agreement signed by the Nigerian government, there were other factors already battling the industry before the government implemented the WTO agreement. As at then, the available power was only 45 percent of the required amount. Today less than 20 percent of the required power input is available to the entire industry, which is much smaller in size. The general moribund power supply in the country is responsible for that. The rising cost of inputs cannot be overemphasised as another factor. Also, the sort of access to foreign exchange equally influenced the high costs of inputs.
The government’s interest seemed to change from the jobs creating sector to the income generating sector. There was gradual, yet continuous neglect of the textile and agriculture sectors, all for the newly found bride – crude oil. These factors are, perhaps, the major reasons for the backwardness of the entire Northern region. Many believe the Northerners and those in the Middle Belt are better farmers. They also had more textiles factories that are presently under lock and key. The obvious truth shows that the regions suffer more from the neglect of these inefficient sectors. Thus, apart from education, government must consider textile and agriculture for the country’s survival, particularly the northern population. From careful observation, unless the national macroeconomic structure is corrected, the economy of these regions may never rise again. This is indeed true for Nigeria at large.
…research and development is second to none. The composition of our population has long changed. While some Nigerians still demand ‘ankara’ or ‘agbada’, the demand for jeans, shirt materials and chinos is largely increasing due to a modern youthful population. We therefore need to research and upgrade our production lines to fit this new tastes.
How has the government responded? Governments have tried to make funds available with no significant impact on the entire textile industry. The Obasanjo administration created a special fund running into billions of naira for the revival of the industry, which was followed up on by the late Yar’Adua administration. However, the impacts of the interventions leave much to be desired. Still, the Bank of Industry (BoI) started intervention funds for the same industry under President Goodluck Jonathan. In all of these, there have been no impact as Nigeria still imports 80 percent of her textile requirements from aboard. One would think the incumbent administration would start considering solving the problem from a different dimension.
Today, an industry that once employed five hundred thousand people directly and another two million indirectly, only has 30 thousand jobs to its credit. Research in 2013 showed that Nigeria could only supply 17 percent of her local demand for textiles, with the rest coming through smuggling from neighouring countries, China and Europe, since our manufacturers can no longer compete.
Who are beneficiaries of the dysfunctional textile industry in Nigeria to today? China, Turkey and Europe. Yes! With the WTO policy and other factors impeding the growth of the industry, Nigeria has exported about two-and-a-half million jobs mainly to China. This, while we can only boast of 30,000 jobs back at home. Today, China’s export value for textile is approximately $210 billion. Nigeria has a demand of about N300 billion worth of textiles per annum. We produce N40 million worth of these, while China, Turkey and European countries are helping us with the rest. Report, for instance, shows that smuggling of textile into the Nigerian market is about N2.2 billion annually.
Now, what is the way forward? We cannot pretend that all is well; protection of the textile industry must take a high priority on the government’s agenda. Nigeria state will need to renegotiate the agreement signed in 1997 for the liberalisation of the textile market, which has done more harm than good. A considerable amount of power must be provided for the factories nation-wide, even if we have to positively ration this towards supplementing the productive sector. More so, the Central Bank of Nigeria needs to consider operators in the industry for preferential foreign exchange access.
Taste usually takes time to adjust, however what seems interesting is that Nigeria has over 20 million pupils in pre-nursery, nursery, primary and secondary schools, both public and private. Again, more than 90 percent of these pupils’ school uniforms are imported. The Nigerian contribution to the value chain is very minimal. It will not be wrong if the current textile production line is directed for this demand.
Finally, research and development is second to none. The composition of our population has long changed. While some Nigerians still demand ‘ankara’ or ‘agbada’, the demand for jeans, shirt materials and chinos is largely increasing due to a modern youthful population. We therefore need to research and upgrade our production lines to fit this new tastes.
Paul Alaje is the Lead Economist at SPM Professionals; email@example.com.