Whither N100bn Textile Intervention Fund?

Area Textile, Kaduna

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Area Textile, Kaduna

Efforts by the Federal Government to revive the ailing textile industry through the N100 billion Cotton, Textiles and Garment (CTG) Revival Fund appears not to be yielding the desired result as the companies have remained comatose, writes Pita Ochai.

In the 1980s, Nigeria’s cotton and textile industry was a key player in the nation’s economy particularly in the provision of jobs for about 20 percent of the population with 600,000 work force operating in about 175 textile mills across the country. The industry then generated an annual turnover of $8.95 billion; an average of 25 percent of the sector’s gross domestic product (GDP) which accounted for not less than 10 percent of corporate income taxes.

Nigeria was then ranked the second largest textile hub in sub-Saharan Africa coming behind South Africa.  Indeed, in the 1980s, technological sophistication in the Nigerian textile industry was highest in the sub-Saharan Africa, as multi-task and heavy equipment such as shuttles, shutless and sulzer looms, knitting, spindles, real wax printing technology, among others, were available.

However, in the mid 1990s the fortunes of cotton and textile industry dwindled due to neglect and policy inconsistencies. Precisely in 1994 when many textile manufacturers began to feel the pinch of the unfriendly economic and political   environment, they were forced to close shop in the wake of massive smuggling and importation of textiles into the country. The situation became worse in 1997 when the federal government lifted the ban on textile importation. Figures showed that the number of textile and garment factories fell from 175 in the mid 1990s to less than 25 in 2010 while employment dropped from 137,000 in the 1990s to 60,000 in 2002 and further to 24,000 in 2010.

In a bid to revive the nation’s ailing textile industry, the federal government had in December, 2009 set aside the N100 billion Cotton, Textiles and Garment (CTG) Revival Fund.  The fund which was domiciled with the Bank of Industry (BoI) was specifically meant for the revitalization of the CTG industry along the entire value chain. It was also geared towards providing cheap capital for the development of the sector and making it one of the highest employers of labour in the country. BoI is mandated to grant loans to textile companies at an interest rate of six percent.

However, five years after the fund was set aside by the federal government, its impact has not been felt in the cotton and textile industry which has remained comatose. TheEconomy learnt that approval and disbursement of the fund commenced effectively in 2009 and by December 2013, 60 percent of the fund had been disbursed with more than 38 firms said to have benefited from the fund. According to Waheed Olagunju, the bank’s Executive Director, Business Development, the bank has given out more than 60 percent of the fund as loan to different textile companies across the country since 2009. But the deplorable condition of the textile factories across the country does not march with the fund disbursed so far, which has raised the fear that the N100 billion must have gone down the drain.

Investigations by TheEconomy show that the fund has not made the desired impact. In most cities visited, including Lagos, Kaduna and Kano, the textile and garment companies are yet to come alive despite the huge amount of money pumped into the sector. Bala Ezekiel, a staff of United Nigeria Textiles Limited (UNTL) in Kaduna said that the operating condition of the company did not improve after its management accessed the loan. He said it was cheery news to the management and staff of the company when the application of the company was granted by BOI, and the loan was subsequently granted to the company, but that seems to have been the end as efforts made to inject the fund into the company did not yield the desired result.

To Ezekiel, the loan was not enough for the company to continue operation or upgrade as there were no raw materials to buy and the few available were bought at exorbitant rate. He explained that the other costs of production that were not factored into the loan later came which the company had to deal with, so the loan was not in any way sufficient for the company to move ahead. Ezekiel disclosed that it wasn’t long after the company obtained the loan that more staff were sacked and others were asked to go on compulsory leave. “Our company has sent most of the staff away. The company was reopened for business in 2010 by Vice President Namadi Sambo and since then, the company has not operated at optimal capacity. What we are doing here are spinning and weaving while the final printing is done in Lagos,” he said.

Another Kaduna-based company which secured the loan is Arewa Textiles Industry. Like UNTL, the fortunes of Arewa Textile Industry have not improved even after injecting funds into the company.

Kano State which used to boast about 31 textile companies functioning at full capacity now has only three textile companies still managing to be in operation. In South-east, the Aba Textiles has remained comatose while in the Edo-Delta axis, the Asaba and Edo Textile Mills are yet to be revived.

It is only in Lagos State that few of the textile companies still manage to sustain productivity. However, the few textile companies that are operational in Lagos are owned by Lebanese. It is noteworthy to say that virtually all the textile companies in Lagos which were vibrant in the 1980s have folded up. For instance, Aswani Textile leased its premises to Chellarams, manufacturer of dairy products while Afprint went into oil manufacturing and car business. Enpee Industries became a packaging industry.

From all indications, the N100 billion set aside by the federal government for the revival of the textile industry seems to have gone down the drains. Mohammed Abubakar, National President of the Nigerian Chamber of Commerce and Industry, Mines and Agriculture (NACCIMA)   believes that the intervention fund has failed to achieve its objectives because the issue of raw materials and machinery were not taken into consideration before putting up the scheme. “If you give loan to an existing factory to develop, when the raw materials are not being supplied competitively, when the loan is not enough to change the machineries completely to be competitive to world standard, you are not going to make it. It is just like putting a new engine in a broken car. You cannot get the result,” he said.

According to him, to ensure the revival of the textile sector, a number of issues should have been put in place, such as ensuring that the country is competing effectively in the production of cotton in line with world standard and that the equipment are producing effectively and efficiently to enable the companies compete favourably. He said: “Firstly, the major raw material is the cotton, secondly is the machinery, if they are not available how can we be competitive by world standard? Thirdly, training, how do we train people to work competitively? So these are the issues being developed on the textile industry. When they finish the research we will start first with the agricultural development of long fibre cotton and if it is being produced and developed competitively, then you get the investors, maybe in conjunction with other existing investors to go mega with bigger industries that will give that competitive edge.”

Hamma Kwazafa, chairman, National Cotton Association of Nigeria, said that his members shunned cotton farming for other crops because the federal government neglected them in its CTG intervention policy. “Yes it’s true that cotton is expensive and not available because farmers have been neglected by the government. An intervention fund was given to textile companies but cotton farmers were excluded. They said we don’t have collateral to benefit from the fund so we were discouraged from cultivating cotton,” he said.

Kwazafa explained that in China today, cotton farmers sell 3,000 tons per hectare of land to the government but in Nigeria the farmer gets very little.  According to him, since cotton farmers were neglected, they have moved to other lucrative products as cotton is no longer profitable. “Let’s take a look at India, since 1962, India still has ministry of cotton and textile which ensures that government policies carry every stakeholders along. Efforts must be made to encourage cotton farming. We must encourage irrigation cotton farming. The dams are not in good shape, lying idle which also causes floods. Something must be done,” Kwazafa said.

Mr. Philip Biodun Kayode of the Department of Polymers Textile Technology, Yaba College of Technology admitted that one of the problems of textile industry is that in the North where cotton farming thrives, farmers would rather plant maize (instead of cotton) because there is high demand for it by the breweries. Kayode urged local investors to key into the textile industry. He however blamed poor power supply in the country, saying it is a contributory factor to the dwindling fortunes in the textile industry. According to him, erratic power situation increases production costs and reduces competitiveness of local textiles as they are often costlier than imported or smuggled ones.  “Electricity has been stable in Ghana, but here in Nigeria, it is not so. Most of the industries are relying on generators. We complain about quality. We wear made-in-Holland fabrics once in a year. But made-in-Nigeria we wash and wear it three times in a week. It is our mindset that is the problem. The rich people want to invest in buy and sell and not production,” he said.

Paul Jaiyeola Olarewaju, director-general, Nigeria Textile Manufacturers Association and Nigeria Textile Garments and Tailoring Employers Association, believes that several challenges have made the revival of the textile industry an uphill task.  “The major problem is the influx of foreign textiles into the country. This is killing the industry. As at today, almost 80 percent of textiles in the country are imported. Though it is still under ban, it’s still smuggled,” he said.

Indeed, investigation revealed that the volume of imported textiles from China, Indonesia, Taiwan and India, among other countries is very high.

To many stakeholders, funding   is just 30 percent of the problems in the sector. According to them, even if the government increases funding but is unable to provide stable power supply, stem importation or smuggling of textiles, the impact of the funding may still not be felt.

Despite the lurid picture painted by stakeholders in the industry, Olusegun Aganga, Minister of Trade and Investment insists that the CTG intervention fund has done a lot of good to the Nigerian economy. According to him, through the fund the textile industry was on the path of revival and about 8,070 jobs have been saved since the disbursement of the money commenced. A mid-term evaluation of the CTG industry commissioned by BOI/UNIDO to evaluate the impact of the scheme reveals that capacity utilization for most beneficiaries has increased from below 40 percent to about 61 percent.  The report also reveals that more than 50 percent of those making losses have started earning profits.

Aganga was optimistic that the country’s textile industry would be revived. According to him, the sector has potential due to Nigeria’s natural cotton endowments and large market size. “Nigeria’s population of over 167 million people represents a natural market for basic textiles and apparel related goods,” he said.

Despite the dwindling fortunes of the textile industry in Nigeria, Olarewaju believes that if the problems of power, importation or smuggling of textiles and funding were adequately addressed, the nation’s textile industry will bounce back.  He   therefore urged local investors “to invest in the industry to help the country out of a mono-economy and over dependence on oil.”

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