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Furore over forex ban on textile - THE NATION

APRIL 14, 2019

 by Charles Okonji

 

The federal government’s decision to restrict foreign exchange access for textile materials importation is causing division in the industry. While some operators argue that the move is healthy for the local industry, others posit this is capable of stifling their businesses particularly, the Small and Medium Enterprises (SMEs). Charles Okonji reports.

If the feeler from the federal government is anything to go by, it means the business of textile import will soon die a natural death. At issue is that recently, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, announced the discontinuation of forex provision for importers of textile materials in the country. The implication is that henceforth such importers would have to source foreign exchange for their businesses.

The death knell

In his response, the CBN governor said the policy will revive the cotton, garment and textile sector, as the old way of providing forex for importers by government is not improving the standard of the textile sector, neither is the duty on textile effective to stop the increase in importation.

CBN boss further disclosed that the new policy was well thought out one aimed at repositioning the sector for job creation and economic growth, adding that the old approach contributed to the closure of about 180 textile mills in the country.

“Nigeria’s dependence on textile importation led to the shut-down of many textile companies which, in turn, caused retrenchment in the textile industry,” Emefiele said emphatically.

He stressed that government has added all forms of textile materials to the new forex restriction list to rejuvenate the industry and ensure that the needed growth was actualised, while several other strategies that would make it difficult for recalcitrant smugglers to operate banking business in Nigeria would be adopted.

According to him, the apex bank would continue to support local cotton farmers through its Anchor Borrowers Programme (ABP) to enable them meet the needs of the local textile industry.

Mixed reactions from stakeholders

But industry operators and other stakeholders seem divided over the new Forex policy for the industry. For members of the Nigerian Textile Manufacturers Association (NTMA), the restriction of Forex to the textile importers is a laudable effort by government that is commendable.

To the NTMA Chairman, Mrs. Grace Aderoti, this new step by the federal government will help move the nation’s economy forward, and also impact positively on the manufacturing industry as a whole.

“This step will help move our economy forward, and would also impact manufacturing as a whole. Also, smuggling is a very big threat to textile and the entire economy that the government must also look into, especially, the porous borders,” Aderoti contended.

She appealed to the Nigeria Customs Service (NCS) to monitor more effectively what is coming into the country, while government should muster the political will to encourage the patronage of made in Nigeria fabrics, as well as ensuring that the fabrics were actually made in the country.

 

NTMA through their chairman are hopeful that the inclusion of textile and garments in the Central Bank of Nigeria (CBN)’s foreign exchange restriction list will be a catalyst for rapid growth and development in the local textile sector and the nation’s economy in general.

“The restriction would reinforce the various interventions of the Federal Government that had erstwhile been futile in the sector.  It is an excellent move that will ensure the survival of the remaining textile companies, and it will even encourage more investments in the sector,” she said.

Aderoti stated that reviving the textile sector to its past glory was vital to the nation’s economic growth and to the government’s job creation objectives, disclosing that CBN would soon meet with stakeholders in the textile industry and the management of Bank of Industry (BoI) over issues relating to textile industry intervention funds.

The meeting will resolve the challenges in accessing the funds and to what extend the tenure for the N100 billion federal government intervention fund and CBN’s N50 billion intervention fund to textile industry, noting that continued intervention would boost the sector’s capacity utilisation, global competitiveness, create employment and improve its contribution to the nation’s Gross Domestic Product.

Recall that in 2010, the federal government introduced N100 billion Cotton, Textile and Garment Revival Scheme to stabilise and resuscitate some closed factories. The CBN later in 2016 floated a N50 billion intervention fund as working capital, debt takeover and long-term loan to the Cotton, Textile and Garment value chain.

A divergent view

But a former Director General of NACCIMA, who also was a consultant to the United Nations Industrial Development Organisation (UNIDO), Dr. John Isemede, took a holistic view on the new policy decision of the federal government on textile import.

According to Isemede, there is still unnecessary confusion in the air, because people have not seen what the CBN governor is looking at.

“The CBN governor is not an enemy of this country; he is the head when it comes to business in the country. People are looking at only one side of the coin, but when it comes to real business, we look at three sides of the coin.

“When it comes to the international trade, there are three sides of the coin. On the other hand, it may be hanging to the left, and it may not be hanging completely to the right. The fifth is that it may be completely hanging to the left. This is when you look at the currency and import, because the Central Bank of Nigeria (CBN) has been on the area of import as import has been on the increase,” he reasoned.

 

He continued; “When you talk of balance of trade and balance of payment, there are issues. The CBN governor did not ban import of textile completely, and he did not ask importers of textile products not to import at all, but he came up with the word that there would be no more availability of forex to the importers at government rate.

“Instead of condemning the CBN Governor, we should look inwards to study over 600 trade agreements signed by the country over the years. Before the Uruguay conference in the 90’s, there was the Tokyo agreement in the 80’s for the textile industry, how did we fair? That was how our textile industry collapsed.

“The second is that under the Uruguay agreement of the 1995, when the general agreement for trade was signed with World Trade Organisation (WTO), Nigerian representatives were there, they signed the agreements without knowing that they were signing the country’s future away.”

He further disclosed that what was agreed, was market access and negotiation in industrial and agricultural sectors, explaining that the agreement was solely for the textile industry, as it was agreed for a 10 year window; which is between 1995 and 2005, that the developed countries would be surrendering 40 percent of what was agreed on at 30 percent, which was service point between 1995 and 2005.

According to the former UNIDO Consultant, ministry officials go about signing trade agreements and after the opening ceremony; they collect estacode, and disappear, leaving the future of the country in jeopardy.

“The CBN Governor is looking at the five sides of the coin; people say that his action will lead to massive unemployment, which is not true. In actual fact, the new policy will accelerate industrial development, and also induce employment in the country. But if this measure is not taken, indiscriminate import of textile would keep creating employment in the countries where they are produced,” Isemede stressed.

But the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf disagrees. He criticised the CBN for placing Forex ban on textile importation, insisting that the apex bank ought to have come up with a strategic approach to the measure before the ban.

He advised the Government to revisit the CBN’s ban, explaining the position of Nigeria in Africa as a leader in fashion, the range of fabrics produced by the local textile industry could not support the industry in terms of quantity and quality.

The LCCI boss pointed out that his stand is not aimed at demeaning the importance of the local textile industry in any way or the significance of the nation’s industrialisation, however, added that this was to underscore the importance of a strategic approach to industrialisation.

“Before such policy statement, the government ought to have enhanced the capacity of the local industries, improved their effectiveness and reduced their import reliance as adopted in the Nigeria Industrial Revolution Plan,” Yusuf posited.

But in swift reaction to LCCI DG, the apex bank in a statement signed by Emefiele argued that the strategic approach being referred to by Yusuf had never worked.

“The issue he raised here is that we need to have a strategic approach to the measures. Whereas one will agree with his view on strategic approach, but I begin to wonder what Muda means when he talked about strategic approaches.

“In the past, the country has adopted what he calls a strategic approach and that strategic approach to my understanding is that he seems to say, allow them to continue to import, let them continue to dump, let them continue to smuggle into the country, they will build these factories and industries.

“When we addressed these issues recently, I had said that at a time in this country, Nigeria had 180 textile mills, today they are dead. Recently, when we held a meeting, there were only 15 textiles companies out of the 180 in the 50s and 60s in the country.

“Jobs have been lost, and that is why we know that while there is unemployment in our country, we ignore an industry that is the largest employer of labour after the public sector.

“The strategic approach had never worked. I want anybody to quote me; it has never worked. What is the policy we are talking about? Increase in duty. Today, duty on textile is 45 percent.

“I have data here that tells me that textile officially imported into Nigeria in 2015 was $9m. In 2016 $6.9m; in 2017, $7m; and in 2018, $9.7m. Is that the quantity of textile that came into Nigeria? My answer is no. And yet people say they pay duty, my answer is no. Because if you paid duty, then we will not have a record that places import of textile into the country at $9m.Both funds are domiciled and managed by the Bank of Industry (BOI),” Emefiele disclosed.

CBN boss sounded it clear that the nation’s dependence on textile importation led to the shutdown of many textile companies which, in turn, caused retrenchment in the textile industry, a road current government is not ready to travel again.

Emefiele insisted that the so called strategic approach, to him, means allowing them to continue to import, let them continue to dump, let them continue to smuggle into the country.

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