Thursday, March 03, 2016 09:43AM / FBNQuest Research
Today we turn our attention to Nigeria’s textile and apparel industry. Industry sources suggest that there are about 30 operational textile mills which are running at an average of 40% of installed capacity. The influx of cheaper fabrics from China and India has been highlighted as one of the reasons for underperformance in this industry.
Based on trade data from the National Bureau of Statistics, Nigeria spent N24.7bn (US$130m) on textile imports in Q3 2015. This represented a 17% decline in naira terms from the N29.8bn recorded in the corresponding period of the previous year.
The FGN placed a ban on textile importation in 2010 in order to encourage domestic production. However, this led to increased smuggling. Textiles also feature in the CBN’s circular of June 2015 specifying 41 import items for which fx from official sources is not available. Smuggled imported textiles account for over 85% of fabrics sold locally.
Most manufacturers within the industry have cited the high cost of financing as a major roadblock. Annual interest rates on their loans are close to 30% whereas in China rates of less than 6% are sometimes available.
The FGN set up a N100bn textile and garment intervention fund, and disbursed funds at rates of 6% interest about six years ago. The impact of the fund was modest since beneficiaries tended to refinance their existing loans and spent very little on capital investments.
Last year the CBN indicated interest in lending support to the industry through the establishment of its own intervention fund at a single digit interest rate. Last month the minister of industry, trade and investment, Okechukwu Enelamah, reiterated that policies geared towards boosting textile and garment industries are being developed.
The annual global output of textile firms is estimated at US$400bn. China’s production accounts for half of this figure.
According to the CBN’s 2014 Statistical Bulletin, the value of cotton production contracted by -1.1% y/y in 2014 and accounted for 5.1% of crop production GDP in the same quarter._
The Bank of Industry blames state governments’ failure to implement the National Cotton, Textile and Garment policy in their respective states for the collapse of textile companies across the country.
We understand that government officials from Turkey are currently visiting Nigeria. Turkey is an important cotton producer and has a well-developed domestic textiles industry.