Textiles Industry in Nigeria - A Case Study
As published by www.textilesnigeria.com
Background
Although traditionally production of textiles has been a centuries old industry, engaged in by Nigerians specializing in cloth production of a huge variety, it was only about 50 years back when industrial production took roots. The industry got a boost with the establishment in 1956 of the Kaduna Textile Mills, followed by United Nigeria Textiles in 1962. Numerous other mills were established since then like Enpee, Aswani, and Asaba. The fact that as of date both Kaduna and Enpee have been closed down along with atleast 70 other textile mills over the past 10 years is an indication of the state of affairs in the industry.
Further to importation of textiles in mass quantities at prices cheaper than local production, many units went into bankruptcy followed by retrenchment of labour force in large numbers. The situation was further aggravated by illegal imports across the border from Cotonou.
The Textiles industry in Nigeria is therefore in a adverse situation potentially facing further losses on the economic and employment perspectives.
Major activities
The industry mainly includes production of cotton and synthetic fabrics. Due to changing trends the production of synthetic fabrics have witnessed an increase over the years in a traditionally cotton oriented industry. Nigeria grows cotton in the country, feeding textile mills over the years. However, higher quality cotton is being imported alongwith synthetic materials. There are however, yarn producing units that use imported raw materials in their local factories.
The industry comprises of the typical prime activities of spinning for yarn production, weaving for cloth production, dyeing, printing and finishing. There are other value added activities like lace and embroidery.
Further to vertical integration of various activities, some of the larger mills cover all the sub-sectors, while smaller units covering single/multiple activity also subsist feeding the larger mills.
Industry Information
Although exact statistics are not available, there are about 60 companies in the textiles industry. This includes companies which are not operational or operating at a very low capacity utilization level. Even on an average, the capacity utilization in 2005 is estimated to be only around 25% of the installed capacity of about 1.5bn meters per annum. Inspite of the ban of imports of fabric instituted in 2004, imports continue to flood the market, given the lower costs as well the increasing preferences among the consumers to use imported fabric.
Many of the mills need to make significant decisions on revamping and retooling bit are generally discouraged given the viability and inability to beat traders who import beating restrictions.
The mills tend to sell their final product either through their own retail outlets or through agents/dealers that they appoint throughout the country.
The industry is mainly controlled by large private-sector firms, often with substantial foreign participation. The major foreign investors within the industry are from Hong Kong, India, the UK, Liechtenstein, the Netherlands, the US, Japan and Columbia. Some of the mills are state owned and a few are owned by local Nigerian companies.
For instance, Afprint Nigeria PlC is part of the worldwide Kewalram/Chanrai family, which has business interests in North America, the UK, West Africa and South and East Asia. Spintex Mills (Nigeria) Limited (SMNL) is wholly owned by Sunflag (Nigeria) Limited, a textile company which manufactures knitted fabrics and ready-made garments, with substantial interests in Kenya, Tanzania, Cameroun, India and the UK.
Stallion Textile Industries Ltd. The Largest Producer of high quality yarn is part of the Stallion Group that's into diverse businesses including agriculture, commodities, manufacturing, automobile assembly, real estate, construction, banking, deep sea fishing and shipping in West Africa, Europe and Asia. Stallion is owned by the Vaswani Brothers, Sunil Vaswani, Haresh Vaswani and Mahesh Vaswani.
United Nigeria Textiles Plc., produces high quality African Prints, Java Prints and Real Wax Prints as well as polyester cotton printed and dyed goods for local consumption. Finished products are also exported to neighboring ECOWAS countries, while high quality grey cloth is sent to the USA, Europe and Asia. It has a vertically integrated manufacturing unit with facilities including synthetic fibre and filament manufacturing, spinning, weaving, real wax printing and dyeing.
Government Policy
The government has been making elaborate efforts to try and restore some balance in the industry.
The government's announced measures include crackdown on smuggled imports, lower import duties on raw materials, ban on imported fabrics and compulsory local procurement by government departments. Industry players in the meanwhile feel more stringent efforts need to be taken.
Current status
Reports say that employment in the textile industry has gone down by almost 70% from 1996 estimating that almost 150,000 people have lost their jobs in the process. Further the market share for local mills is only around 25% and rapidly decreasing, losing out to cheap imports. There are further incidental losses for a significant number of dependant.
Given the instability in power supply to the factories, many units rely on diesel generated power for their operations - in view of steady increase in fuel prices, the viability of such operations are seriously in question. Availability and costs of water is another perennial issue faced by the factories.
The border agreement signed in 2004 between Nigeria and Benin has risen to some concerns for the textiles industry which is already reeling from the onslaught of cross border imports. The agreement calls for goods to pass through freely across the border.
Another area of concern has been the import of second hand clothes from the Far East in large quantities inspite of a ban from the government.
According to reports in local press, many factories are closing down. Some of the closed factories include Arewa Textiles (under receivership of Union Bank Plc), Afprint Plc, Enpee, Five Star, Gaskiya, Aba Textiles, Specomill and Zamfara Textiles. Finetex and Northex at Kaduna, owned by businessman Aminu Dantata is also in trouble having closed down due to continued losses.
In the sub sectors, companies that are generally well managed and sufficiently resourced are still surviving successfully despite the industry wide issues. Companies such as Stallion Textiles, that is part of the heavyweight Stallion Group led by Sunil Vaswani have been performing relatively well in yarn production through efficient production methods and investments into modern tooling.
Conclusion
The circumstances surrounding the textiles industry calls for an urgent government intervention in stopping the rapid downward spiral of industry fortunes through a coordinated approach in consultation with industry players.
The mills and the other sub sectors need to focus on embracing new technology for optimizing costs, better training and management and proper financial restructuring.
