The textile, apparel and footwear sub-sector remains the second largest contributor to Nigeria’s manufacturing sector (after food, beverage and tobacco). It posted total output of N340bn (US$1.1bn) in Q2 2018 or 22.1% of manufacturing GDP. The segment grew by 2.7% y/y in Q2 2018, compared with 1.9% in the previous quarter (see chart). Given Nigeria’s huge appetite for fashion and related industries, the segment is still performing well below its full potential.
- Based on recent trade statistics from the NBS, imports of textile and clothing items stood at N33bn (US$108m) in Q2.There is an influx of imported textiles as well as ready-to-wear garments. Based on industry sources, the annual bill from smuggled apparel is estimated at US$1.2bn. This places a dent on revenue collection from customs via lost duty and value added tax.
- Over the past three years, the FGN has made efforts towards resuscitating textile mills across the country. The focus has been on reviving at least 25 out of the 175 textile mills which were operational decades ago. The slight improvement in the textile industries has resulted in increased demand for cotton.
- However, the production of cotton (which accounts for 40% of raw materials required in the textile industry) has been stunted due infrastructural issues as well as poor access to finance. Cotton farmers require a minimum of 25,000 tons of cotton seeds to produce sufficient quantity for use by local textile mills.
Manufacturing, and textile, apparel & footwear growth (% chg y/y)
Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
- The cotton farming segment is set to receive an investment of US$2bn. This has been secured by the federal ministry of industry, trade and investment. During its visit to China earlier this month for the China-Africa Summit, the ministry signed an MoU with Shandong Ruyi.
- The agreement should boost activities across Nigeria’s cotton value chain, from growing to ginning, spinning, textile manufacture and garment production. We expect this to assist with easing pressure on the job market.