By Akanimo Sampson
The latest move by the Central Bank of Nigeria (CBN) to pump in oxygen into the dying textile industry of the country, has literally received a standing ovation from a financial analyst, David Ibidapo.
Ibidapo told the News Agency of Nigeria (NAN) in Abuja, Nigeria’s capital that the amount spent on importation of textiles and garments into the country could fund more than half of her budget deficit. For him, it was commendable that the apex bank placed access to foreign exchange for all forms of textile materials on the foreign exchange restriction list.
CBN Governor, Godwin Emefiele, had the previous Tuesday said Nigeria currently spends above four billion dollars annually on imported textiles and ready-made clothing, and Ibidapo also noted that the restriction will reduce pressure on forex and inspire local production of textiles for both local and international consumption.
According to Ibidapo, ‘’this is a good initiative by the CBN because if you look at what we spend on importation it is about 50 per cent of our budget deficit and imagine if that amount is being generated internally, it will automatically impact on our Gross Domestic Product (GDP).
“This will also inspire local production of textiles with the single digit rate the CBN is promising local textile industries that are interested in getting loans. It will also lessen pressure on forex as demand for it to import these textiles into the country pressures down the value of the naira against the dollar.”
Continuing, he said it is high time Nigeria controlled the levels of goods imported as too much dependence on importation is killing local industries due to unhealthy competition with foreign goods, adding that considering the country’s rising population, it serves as a very good investment hub for foreign investors and companies because of the very ready market it had waiting to buy these goods.
‘’However, once we begin to ban some items that we have the capacity to produce then this same rising population will purchase what we are locally producing and the sectors will begin to contribute significantly to the GDP. The only way we can alleviate poverty is to grow the economy at an average of 10 per cent every year and we are still struggling to do two per cent.’’
While arguing that the country needs to continue in the direction the CBN has toed and that it is also good that loans will be given to the textile industry value chain at a single digit interest rate, Ibidapo pointed out that in the long run it will boost the country’s GDP and create employment.
He said this was because when these factories began to boom, there would be more employment which would translate into income that would be circulated in the economy to achieve the needed growth, harping that achieving growth through such initiatives was solely dependent on the government willingness to be committed to the policy and ensure it clamps down on smugglers.
Explaining, he said ‘’I think we can achieve the desired result only if the government can really reduce the activities of smugglers and make the process of getting loans for the textile industry not too complex. Professionalism and specialisation will also improve, the government should be committed to the policies and in making it work; it is very achievable.
‘’If they can replicate this in other sectors and try to boost production of the items we import in our country, we will produce for the country and also export as demand for these products will increase and with that the value for our currency will begin to appreciate.’’
In the mean time, the textile industry which was once a vibrant sector of the country’s economy, has been grinding to a halt, and government has not been walking their promises to revitalise the sector.
Between the late 1950s and the early 1990s, the textile industry played a pivotal role in stemming the tide of unemployment in the country. The country’s first modern textile industry is the Kaduna Textile Mill, which started production in 1956.
The main logic for setting up the mill was to process the cotton being produced at the time, in the North. By the 1970s and the1980s, the industry had grown to become the third largest in Africa.
For instance, a report by the United Nations University (UNU) stated in 1987 that there were 37 textile firms in the country, operating 716,000 spindles and 17,541 looms. This was the golden period of the industry. Between 1985 and 1991, it recorded an annual growth of 67%, and as at 1991, it employed about 25% of the workers in the manufacturing sector.
In a seeming bid to avert the collapse of the industry, the Bank of Industry in August 2010, released N30 billion as grant to the sector, as part of the Cotton, Textiles and Garment Industry Revival Scheme passed at the end of 2009. In total, N100 billion was expected to be injected into the dying industry.
And in 2015, the CBN similarly restricted the availability of foreign exchange to the importation of 41 items which could be competitively produced within the economy and the list has increased overtime.