Surmounting the hurdles in Africa’s cotton and textile industry (2)
Dr. Olukayode Oyeleye, Business a.m.’s Editorial Advisor, who graduated in veterinary medicine from the University of Ibadan, Nigeria, before establishing himself in science and public policy journalism and communication, also has a postgraduate diploma in public administration, and is a former special adviser to two former Nigerian ministers of agriculture. He specialises in development and policy issues in the areas of food, trade and competition, security, governance, environment and innovation, politics and emerging economies.
Africa’s trade relation with the rest of the world, as it is presently, is awkward. It got worse in recent times, particularly in the manufacturing sector due to some powerful external factors. China’s highly competitive manufacturing sector has devastated many smaller-scale rivals across Africa, Asia and Latin America in the course of implementing Beijing’s global strategy and the pursuit of global ambitions, with growing dominance in global trade.
The recent launch of One Belt One Road (OBOR) was a bolder and more overt step in legalising China’s expansionist programme which seeks to legally expand the frontiers of Chinese trade globally. Although it is being marketed on the economic front, it may well be a veritable prelude to a political façade.
In the cotton-textile-apparel sector, Africa’s competitiveness is low. The African textile industry holds the short end of the globalisation stick and so loses out in the struggle with more potent outside economic forces. Nigeria has been particularly hard hit. Following the ripple effects of the damage done by pernicious economic policies of structural adjustment some three decades earlier, the Chinese contraband had so thoroughly captured the Nigerian market that it would be impossible for the Nigerian operations to compete. The tide of fake Chinese-made textiles has risen so high that it could no longer be hid and has turned destructively against Nigeria. At a point in the past, Chinese fabrics fraudulently labelled “Made in Nigeria” used to be a hidden international trade. Not so anymore! From the Chinese factories, imitations of what Nigerians previously produced for themselves are churned out. These fabrics make their way to West Africa’s ports, particularly near Nigeria from where they undergo trans-shipment by smuggling into Nigeria in a trade estimated to be worth about $2 billion a year, equivalent to about a fifth of all annual recorded imports of textiles, clothing, fabric and yarn into the whole of sub-Saharan Africa.
In the context of OBOR, is China’s dominance in the textile product business not likely to increasingly put Africa in general and Nigeria in particular at a greater disadvantage, further eroding the chances of continent’s textile industry’s recovery? Smuggled garments are bad news for Nigeria’s textile industry. Imports comprise 85 percent of the market, despite the fact that importing textiles is officially considered illegal. The World Bank has estimated that textiles smuggled into Nigeria through Benin are worth $2.2bn a year, compared with local Nigerian production that shrank to $40m annually. According to a team of experts working for the United Nations, in 2009, “The Nigerian textile industry is on the verge of a total collapse.” What verdict would a review of the industry now yield, a decade after?
The reality now is that about half of the million farmers who used to grow cotton to supply textile mills no longer do so. Many have switched to other crops. With a rising rate of unemployment and a swelling labour market, formal jobs in Nigeria are scarce and precarious. Each textile employee supports half-a-dozen relatives. The Nigerian economy occupies a prominent niche and takes a huge share of the African economy, and greater still when considering West Africa. Nigeria is thus seen as a microcosm of Africa in various socio-economic ramifications.
Nigeria was not in isolation in the deindustrialisation blight that swept through Africa. Measured as a share of the overall output of the combined African economy, the fall of manufacturing from 15 percent in 1990 to 11 percent in 2008 pushed countries that have started to industrialise into the reverse process. Historically and in contemporary times, Nigeria’s main industrial predicament remains the poor electricity connection to the factories. Nigeria reportedly produces only half as much electricity as North Korea. The crippling cost of electricity makes Nigerian textiles expensive to produce.
The government’s attempt to support the Nigerian textile sector by banning imports remains futile and ineffectual. The textile industry was a significant non-oil sector of the economy, which provided direct and indirect employment to the masses. Besides, varied and thriving economic activities were witnessed within the textiles gates and around the host communities. The sector was such a boom that it was rated the second largest in Africa after South Africa.
Cotton used to have a huge share in the estimated $3 trillion global textile industry. Sometimes ago, Nigeria was feeding the domestic textiles with as much as one million tonnes of locally produced cotton. Nowadays, however, the quantum has reduced drastically.
In the pre-SAP 1980, cotton turnover in Nigeria was worth N8.9 billion, which represented 25 percent of the National Gross Domestic Product (GDP), mostly from manual, small-scale farmers. Sadly, it slumped to only N300 million in 2012.
The concomitant effects on the ginning sub-sector were equally worrisome as only 26 out of 52 ginneries in Nigeria are currently operational.
From global assessment, a report by International Cotton Advisory Committee (ICAC) (2006/2007) showed that Nigeria had 51 ginning companies but only 17 were fully operational with 33 percent ginning capacity utilisation and approximately 250, 000 cotton farmers.
Recent reports indicate that the number of registered cotton farmers has dwindled to about 67,000. However, the ICAC 2016 data released December 1st showed that Nigeria now produces 51,000 metric tonnes of cotton on 253,000 hectares with the average yield of 202 kg per hectare only. Miserable, isn’t it? But the grim statistics were a result of a combination of manual operations rather than mechanised, poor quality and low-yielding varieties of planting materials, insignificant irrigation support and climate change impact on production.
Surmounting hurdles in Africa’s cotton, textile industry (I)
Like in some other countries that took the structural adjustment pills of economic reforms, Nigeria made the strategic blunder of dismantling the Cotton Marketing Boards with no sustainable substitute afterwards. Nigeria spends $4 billion (about N1.36 trillion) annually on import of textiles and readymade clothing, further compounding the difficulties for those industries in the country to operate and compete.
Nigeria’s National Bureau of Statistics (NBS) observed that the textile, apparel and footwear industries contributed only 2.10 percent of GDP in Q1 of 2016. A proper diagnosis of Nigeria’s standing in the global context of cotton and textile industry will depend on differences between supply (depending on factors like the environment, agricultural policies, mechanisation, etc.) and demand for cotton (resulting mainly from textile industrial activities) in the international cotton fibre trade.
According to an OECD report; “Since 1960, world production of cotton fibre has doubled, from 10.2 to 20.3 million tons, representing a moderate average annual growth of 1.7 percent. Although there are numerous cotton-producing countries, global production is largely dominated by China (28 percent), followed by the United States (17 percent) and India (12 percent). These three countries alone account for nearly 60 per cent of total global production of cotton fibre in 2004/05, compared to 47 per cent, nearly 30 years earlier.”
The era of global prosperity and rapid technological advancement has led to efforts directed at transformation and quest for alternative raw materials for the textile industry. Cotton represented 68 percent of total fibre use in 1960; this percentage underwent a downward trend to reach 38 per cent in 2000. Between 1960 and 2000, global demand for cotton fibre increased at the same pace as population growth (1.8 per cent annually). By contrast, during this period, global consumption of artificial fibres increased by 4.7 per cent per year, with a relative decline of cotton compared to synthetic fibre.
Oyeleye, a policy analyst, journalist and veterinarian, writes from Abuja
Business a.m.’s comment pages are a place for thought-provoking views and debate. These views are not necessarily shared by Business a.m.