About $140 million (N27.5 billion) would be spent on imported textiles by the end of the year, Thisday reports.
Foreign textiles are among the 41 items that will not benefit from official foreign exchange from the Central Bank of Nigeria (CBN).
However, analysts have estimated that about $140 million would be spent on imported textiles by fourth quarter of the current year.
Data from the National Bureau of Statistics (NBS) showed that Nigeria spent N24.7 billion ($130 million) on textile imports in Q3 2015.
Industry sources suggest that there are about 30 operational textile mills in Nigeria, which are running at an average of 40 per cent of installed capacity. However, the influx of cheaper fabrics from China and India, has led to the underperformance of this industry.
In order to encourage domestic production, the federal government had placed a ban on textile importation in 2010. However, this led to increased smuggling.
Estimates by analysts at FBN Capital showed that smuggled imported textiles account for over 85 per cent of fabrics sold locally.
Meanwhile, most manufacturers within the industry have cited the high cost of financing as a major roadblock to the several efforts to move the industry forward.
“Annual interest rates on their loans are close to 30 per cent whereas in China rates of less than six per cent are sometimes available. The federal government set up a N100 billion textile and garment intervention fund, and disbursed funds at rates of six per cent interest about six years ago. The impact of the fund was modest since beneficiaries tended to refinance their existing loans and spent very little on capital investments.
“Last year the CBN indicated interest in lending support to the industry through the establishment of its own intervention fund at a single digit interest rate. Last month the Minister of Industry, Trade and Investment, Okechukwu Enelamah, reiterated that policies geared towards boosting textile and garment industries are being developed,” analysts at FBN Capital said.
They added: “The annual global output of textile firms is estimated at $400 billion. China’s production accounts for half of this figure. According to the CBN’s 2014 Statistical Bulletin, the value of cotton production contracted by 1.1 per cent y/y in 2014 and accounted for 5.1 per cent of crop production GDP in the same quarter.
“The Bank of Industry blames state governments’ failure to implement the National Cotton, Textile and Garment policy in their respective states for the collapse of textile companies across the country. We understand that government officials from Turkey are currently visiting Nigeria. Turkey is an important cotton producer and has a well-developed domestic textiles industry.”
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