AUSTIN IMHONLELE
As indecision as to how the N70 billion fund would be disbursed continues, travails of the sector also continue to deepen
About two years ago, a N70 billion textile revival fund was approved by the federal government.
N50 billion of the amount was earmarked to be disbursed to textile manufacturers and the rest for the enhancement of cotton production. Since then, not much positive story have been heard as the wrangling and dispute over who should disburse the fund overshadows the essence on which it was initially thought up.
The latest move by the federal government confers the power of disbursement on the Bank of Industry, (BoI). Initially, United Bank for Africa (UBA) Plc was identified as a vehicle to disburse the fund. It was later taken away from them and passed on to Nigerian Export Import Bank (NEXIM).
As the indecision as to how the fund would be disbursed continued, the travails of the sector continued to deepened.
The textile sector which is most hit by mass factory closure and loss of jobs has in the last two years been closed with more than half of the remaining 35 mills facing imminent shut down. The largest textile group in the country, the United Textile (UNT) was not immune from this closure with 5,000 people sent to labour market.
Recent World Bank report revealed that over $2billion worth of textiles are smuggled into Nigeria annually, blaming the outright prohibition of importation of textile materials by the Nigerian government.
Recent Business Day survey showed that local textile has a market share of about 20 per cent, with the balance of 80 per cent being controlled by assorted imported fabrics. The recent spate of closures in the industry was driven largely by smuggling, high operating cost arising from prohibitive raw materials and energy cost as was the case in UNT PLC Kaduna and ATM Lagos, and sheer lack of political commitment to industrialisation by Nigerian politicians.
The loss of job was highest when the United Textile Mill in Kaduna recently closed down with about 5000 people sent to the labour market. Atlantic Textile Mill in Lagos also closed down with about 1000 people out of job while Bhojr Textile Industry recently closed down with over 1,500 workers sent to labour market, other existing factories have been cutting down job due to inability to cope with high cost of production and inability to compete in the market, says, Issa Aremu, general secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN).
This has prompted members of the Nigerian Textile Manufacturers Association (NTMA) to again raised alarm over the continuous smuggling and faking of made in Nigeria textile products, saying it has caused the collapse of more textile industries in the country.
The sector’s biggest headache has been inconsistent government policies and harsh environment in which it operates, according to analysts.
Operators say, the manufacturing sector of the Nigerian economy will continue to operate at low capacity until the problems of inconsistent government policies and inadequate infrastructure such as power which could boost production capacity in the sector are addressed by government.
Highlighting the problems faced in the sector in Lagos recently, Paul Olarewaju, director general of the association said though there had been a general distress in the country’s manufacturing sector but that of textile industry is more pronounced because it had always been a major player in the manufacturing sector of the economy.
The industry currently faces the problems of infrastructural decay, inconsistent government policies, multiple taxation, and high cost of doing business among others.
According to him, the textile industry has its unfair share of Nigerians’ penchant for foreign goods, smuggling, faking and counterfeiting of Nigerian made fabrics.
He said smugglers now produce faked and counterfeited products of popular textile companies in the country.
In order to beat customs check at the border, most smugglers import fake made in China textile materials with the inscription of a Nigerian brand name.
Although these problems had been presented to appropriate government agencies but there has been no action from government even as the N70 billion revival fund for textile industry set up since two years ago is yet to materialise.
According to Olarewaju: We met the minister on February 5th, and all he told us was that the fund was being repackaged and they would let us know the update as soon as possible, only for us to now hear that BOI is to take over the disbursement of the fund. We are surprised.
The NTMA chief said that the association’s concern bothered on the extent of work NEXIM and UBA had done on the issue and stressed that NTMA had nothing against BOI’s handling of the fund.
Olarewaju said: Our concern is, we are not sure if BOI has all necessary information, which NEXIM has gathered. If not, that means we have to start all over again. Whoever handles it is not the issue but beginning again. If BOI can fast- track things, okay, but its getting too late.
The NTMA chief added: If government introduces an initiative. It must ensure that it is well implemented. The prevailing situation looks dicey. Is the delay due to bureaucracy or infighting among the parties involved?
Whatever the case may be, the disbursement had taken much longer than expected. And this is giving great concern.
Commenting on the situation of the sector Bashir Borodo, president of the Manufacturers Association of Nigeria (MAN) told Business Day that the problem of smuggling of textile products into the country is not yet addressed.
According to him, We have advised that the solution to the problem is for government to embark on a diplomatic initiative with the governments of Benin Republic and Togo. Go to Cotonou and you will see the level of development there, which is largely from the revenue accrued from their ports. And 80 per cent of the goods from Cotonou are brought to Nigeria.
To Borodo, the devaluation of the naira, smuggling and the recent waiver on vegetable oil importation remained issues of contention between sector operators and the government because of their negative impacts on operators.
Business Day gathered that the endless wait for the disbursement of the N70billion textile revival fund, with government’s recent disclosure that the disbursement would now be done through the Bank of Industry (BOI) will continue for a while.
Commerce and Industry Minister, Achike Udenwa, also disclosed recently at a media briefing that the fund would be released through BOI.
Making this known to journalists during his recent visit to Lagos, the Minister, said efforts to get the N70billion cotton/ textile funds is still on. We are being careful at releasing the funds because if we release it without adequate safeguards, it may be misused and may not be given to the appropriate industry.
As the minister, I may be in a hurry to release the money but the technical team may have the reason for not releasing the funds.
Stakeholders are now raising questions as to the manner the federal government is handling the case. They are asking questions as to the delay in the fund’s release, why the deiscion was taken to give the disbursement right to the BoI and why UBA Plc and NEXIM Bank which previously had government’s mandate on the fund’s sourcing and disbursement were jettisoned.
It would be recalled that the former Minister of Information and Communication, John Odeh had in 2008 disclosed after one of the Federal Executive Council meetings: The council today considers the textile revival fund established on May 16, 2007 and decided to address the problem of the industry along with the other policy support initiatives.
Council, therefore, approved that NEXIM should continue with raising the fund, with the UBA Plc as the financial arranger for the N70 billion textile revival fund for lending to the textile industry at a single digit interest rate.
Indeed, NEXIM and UBA commenced activities to actualise the proposal. Expectedly, they involved the Nigerian Textile Manufacturers Association (NTMA) in their efforts and visited some textile firms nation-wide. Hence, controversial issues like who should benefit from the fund, the criteria for disbursement and others were addressed.
Unfortunately, however, the fund remained non-disbursed because of what was simply described as administrative problems which includes government’s refusal to guarantee the fund as demanded by the banks.
Udenwa’s information on the fund, therefore, came as a surprise to stakeholders.
Contrary to world bank view on the way forward for the sector, which states that government should rather place higher tariffs to discourage massive importation of commodities to achieve set targets of protecting local manufacturers, stakeholders had insisted that government should consolidate its commendable policy of ban by setting up a task force consisting of stakeholders to assist customs in ensuring effective implementation.
Specifically, stakeholders want government; address urgently and on a sustainable basis the energy problem.
Take immediate step to halt the unabated rise in diesel prices, as most industries are generator driven.
For Issa Aremu, general secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), since the assumption of office of President Umar Yar’ Adua about 35,000 textile workers have lost their jobs as a result of closure of about 12 textile mills in the country.
Most of the existing factories have cut down their workforce from 500 to 250 while some reduced from about 800 to 400 and when these are put together about 35,000 people are so far out of job in less than two years.
The sector which used to have over 200 factories now have about between 10 to 30 existing factories in the country with less than five really operating at a reasonable condition but still struggling to survive the harsh production environment as the capacity utilization now falls bellow 20 percent.
The textile industry had seriously been threatened in the past years, by inadequate funding, invasion of local markets with foreign textiles and cotton products, high cost of production occasioned by epileptic power supply and high cost of low pour fuel oil (LPFO) that textile factories use for steam generation.
