Development financing: In praise of Emefiele
Stakeholders in the renewed drive to re-industrialize Nigeria have recently Mr Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN) for the recent ban on sale of forex to importers of textiles into the Country. This is a singular praise for the CBN Governor not too much. The Central Bank of Nigeria on Tuesday March 5, 2019 at its meeting with stakeholders in the Cotton, Textile and Garment value chain in Abuja last week listed all forms of textile materials among items prohibited from foreign exchange in the official windows. The CBN also promised a financial intervention to textile manufacturers with the provision of funds at “single digits rate, to refit, retool and upgrade their factories to enable them produce high quality textile materials for the local and export market.” More than ever, the CBN has commendably financed development in Nigeria under the leadership of Mr. Godwin Emefiele the most celebrated being the novel rice borrowers scheme that has improved rice sufficiency and food security for the country. The point cannot be overstated that smuggling and wholesale importation of textiles contributed to the closure of many textile industries in the past. Indeed it’s time Nigeria dammed smuggling and illegal importations of finished goods to economic terrorism which has denied the economy revenue, killed domestic industries, fueled mass unemployment youths violence. Undoubtedly the renewed initiative of the CBN governor would boost local production, create jobs and lessen pressure on forex if fully implemented. Yours comradely salutes the creativity of CBN on the dollars restrictions on some goods Nigeria could produce at home including Textiles. I agree with the CBN Governor that the the decision to stop financing illegal importers of textile products was critical towards reviving the moribund sector and creating jobs for Nigerians. The apex bank governor disclosed that the country currently spends over $4 billion annually on imported textiles and ready-made clothing which is unacceptable. The CBN governor also said the CBN would craft adequate measures to deal with the menace of smuggling, which had often threatened efforts towards self-sufficiency. According to him, CBN will make life difficult for smugglers. He warned all FX dealers in the country to desist from granting any importer of textile material access to foreign currency in the Nigerian foreign exchange market.
In the 1970’s and early 1980’s, Nigeria was home to Africa’s largest textile industry, with over 180 textile mills in operations, which employed close to over 450,000 people. The textile industry was the largest employer of labour after the public sector, contributing over 25 per cent of the workforce in the manufacturing sector. The industry was supported by the production of cotton by 600,000 local farmers across 30 of Nigeria’s 36 states. The sector supported the clothing needs of the Nigerian populace, local markets were filled with locally produced textiles from companies such as United Textiles in Kaduna, Supertex Limited, Afprint, International Textile Industry (I.T.I), Texlon, Aba Textiles, Asaba Textile Mills Ltd, Enpee and Aswani Mills amongst several others.
Many many textile employers had laid off employees while most have all stopped operations, leaving only 25 textile factories in operation presently and operating below 20 per cent of their production capacities with total workforce of less than 20,000 people. It is commendable that the CBN puts in place creative measures to stimulate domestic production, put a stop to factory closures and create new jobs. As a developing economy Nigeria needs creative monetary policies and development financing that could boost industrialization. The Federal government must complement the development financing of the CBN through fiscal, industrial and labour market policies to reinvent Nigerian economy and ensure sustainable decent jobs for the youths. Certainly financing is one critical success factor in textile revival. But there are more critical issues as contained on the Cotton, Textile and Garment policy already worked out by all the stakeholders over the years. In 2010, the Federal Government introduced a N 100 billion cotton, Textile and Garment Revival Scheme, managed by the Bank of Industry (BOI) to reserve the ugly trend of progressive collapse of the Textile Industry. Some years three years after, the Bank of industry in conjunction with the United Nations Industrial Development organization (UNIDO) appraised the fund’s performance which revealed that a substantial portion of the fund had been successfully disbursed to beneficiaries and the impact was very encouraging. Some numbers from Manufacturers’ Association of Nigeria (MAN) then revealed that the capacity utilization in the subsector increased tremendously, from 29.14% in 2010 to 49.70% in 2011 and is presently estimated to be 50.2%. At a point the Federal government also approved the conversion of the existing NGN100 billion ‘CTG Fund’ from a loan to the Bank of Industry into equity of the government in the bank. To further provide additional source of funding, it is recommended that all levies/supplementary taxes collected on Textile imports in Nigeria be automatically transferred to the BOI in a second ‘CTG’ Fund II’ for use in developing the integrated and Textiles Parks (ITGPs) and providing long term affordable funding to Textile companies. However, as significant as this financial intervention, smuggling and counterfeiting of textile products into the country continue unabated making local mills unable to compete with the smuggled textile products. Of course when we add the crisis of electricity, cost of diesel among others we can appreciate while industries are imperiled in Nigeria. Long term solutions must include sustainable cotton production. CBN must also ask for verifiable performance criteria from the supported textile firms in terms of employment of workers and adequate compensation and training for their workforce.