The textile, apparel and footwear sub-sector remains the second largest contributor to Nigeria’s manufacturing sector (after food, beverages and tobacco). It posted the total output of N799bn (US$2.6bn) in Q3 2018 or 22% of manufacturing GDP. The segment grew by 1.0% y/y in Q3, compared with 2.7% in the previous quarter. Although Nigeria has a huge appetite for fashion and related industries, textile manufacturers struggle with limited capacity for clothing production, poor patronage, and meagre purchasing power.
- Based on recent trade data from the National Bureau of Statistics, imports of textiles and clothing items stood at N44bn (US$143m) in Q3. Industry sources suggest that the annual import bill for textiles and garments is as high as N300bn, and that the FGN loses over N75bn per year in unpaid duties due to smuggling.
- The second-hand clothing market (with goods mostly smuggled from Benin Republic and Togo) has expanded over the past several years, and is patronised by low-income earners and the section of the shrinking middle class that can no longer afford brand new clothing. This is placing additional pressure on retail and the garment production industry in Nigeria.
- It seems that the second-hand clothing market is not peculiar to Nigeria. However, the authorities in other countries like Kenya, Uganda, Rwanda, Tanzania and South Sudan have decided to ban imported used clothing completely in 2019 to boost their domestic apparel manufacturing.
- Over the past years, the FGN has made efforts towards resuscitating textile mills across the country and has successfully revived 25 out of the 175 textile mills which were operational decades ago. The federal ministry of industry, trade and investments estimates that at least N500bn is required to achieve a full turnaround.
- We understand that an incentive for investors who invest a minimum of US$10m in the local cotton, textile and garment industry and employ 500 direct nationals, is levy-free importation of fabrics worth 50% of their operation for a period of five years. In our view, this would limit the expansion of local textile manufacturing as opposed to resulting in a boost.
- The sector has attracted sizeable investments in the past. One is the Bank of Industry’s (BoI) N100bn textile revival fund. The BoI has disbursed N60bn for 70 projects within the cotton textile and garment (CTG) value chain. Although laudable, it has had minimal impact.
- Recently the Vlisco Group of Netherlands expressed its intention to inject US$200m into the textile industry. This investment is expected to create over 500,000 jobs.
- As with other sectors of the economy, the textile industry can achieve its full potential only under a favourable business climate i.e. policies that would enhance the ease of doing business, and drive private sector participation (local and foreign investors).
