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Conversations around textile, garments, ready-to-wear and fashion generally are incomplete without any reference to agriculture or the manufacturing sectors of the economy.

Inclusive growth in Nigeria can be driven by several segments of the economy, including cotton farming. Data from the International Cotton Advisory Committee (ICAC) revealed that only 51,000 metric tons (mt) of cotton was produced last year. Meanwhile, industry sources suggest that the country has only 23 ginneries which have a combined capacity of 650,000mt of cotton seeds but produces just 60,000mt annually, representing c.10% capacity utilisation.

Africa produces about 1.5 million tons of raw cotton annually and 85% is exported unprocessed. Plexus, a global agribusiness company with primary focus on cotton, has opened an integrated textile and garment operation in Uganda. Based on their operations in Uganda, cotton valued at US$60m is transformed into finished goods and sold for US$700m. Plexus has some presence in Nigeria but not to the extent as in Uganda.

Essentially, Nigeria is losing out tremendously in the cotton farming market. The potential annual export value is estimated at US$6.5bn. Furthermore, industry sources reveal that the country’s annual import bill for textiles and ready-to-wear apparels is US$4bn. In the United States, cotton remains a leading cash crop which stimulates business activities for factories. The processing and handling of cotton post-farm activities generates more businesses and therefore jobs. Annual business revenue stimulated by cotton in the US economy has been estimated to exceed US$120bn, making cotton one of the country’s top value-added crop.

However, this may be an unfair comparison with Nigeria given that some of Nigeria’s limitations to a booming cotton industry are not experienced in the US. They include low quantity of seeds accessible to farmers, lack of adequate inputs, poor transport infrastructure and the list goes on. The federal ministry of agriculture and rural development highlighted in its policy roadmap the lack of an industry wide standardisation system as a core reason for underdevelopment within the segment.

Chinwe Egwim
Macro Economist & Fixed Income Analyst at FBN Capital

Source: The Guardian, 3 July, 2017.
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