By Nse Anthony-Uko in Abuja
A N50 billion fund provided by the Central Bank of Nigeria (CBN) to manufacturers in the country’s cotton, textile and garment industry appears to be failing to do the business of reviving the sector, operators in the industry have suggested. They said they would need more than funding to revive the ailing sector, which has has remained uncompetitive despite their accessing 88 per cent of the intervention funds provided by the apex bank.
The CBN introduced the fund in 2016 to facilitate the takeover of the existing debts and to provide additional long term loans and working capital to existing companies in the CTG industry.
Information available to business a.m. indicates that N44 billion, which represents 88 per cent of the intervention fund has so far been released by CBN and been disbursed to the various beneficiaries in the sector by the Bank of Industry (BoI), the institution that is administering the fund.
Jonathan Tobin, executive director, corporate services at BoI, confirmed the loan disbursement during a colloquium, held on the sidelines of the CBN’s workshop on monetary policy implementation amidst global economic protectionism.
Tobin wondered why the impact of the fund was not felt in the economy even after N44 billion had so far been disbursed.
business a.m. recalls that in 2009, the Nigerian central government had approved and authorised the Debt Management Office (DMO) to issue a long-term bond for the N100 billion to BOI at a coupon rate of five percent for on-lending to businesses under CTG value chain.
In October 2013, the loan was converted to equity by the federal government which assisted the BoI to restructure the loans by tenor elongation and reduce the interest rate further to four per cent.
Despite these interventions, the contribution of the cotton industry to the gross domestic product (GDP) had fallen from about 25 percent in 1980 to about five per cent in recent time.
Commenting on this, Hamman Kwajaffa, director-general, Nigeria Textile Manufacturer’s Association (NTMA) said the problem of the sector is beyond funding.
According to him, though the funds have been injected into the sector to improve their operations, the issues of poor infrastructure, smuggling and insecurity, especially in the North-east have not allowed the sector the fair ground to compete globally.
Kwajaffa said what the sector needs is the right policy for a robust sector that will be religiously implemented by the government.
He noted that the textile factories buy gas at $7.8 per SCM, and wondered why it should be so, while in other African countries it is sold for $2.5.
“The government should tackle the issue of gas being paid for in dollars by manufacturers. The amount spent on gas by industry operators wipe out their bottom line. This alone has already rendered operators in the sector uncompetitive against manufacturers from the Asian countries that flood our markets with their cheap textile materials. Our appeal is for government to place manufacturers under strategic industrial sector so that they will not have to pay so much for gas,” he said.
The lack of enabling environment was challenging capacity utilisation of manufacturers, Kwajaffa said, adding that if an enabling environment was created fabrics and textiles produced by local manufacturers would be exported to the developed world, such as to the US under the AGOA, and the European Union’s Generalised Scheme of Preferences (GSP), which Kenya, Ethiopia, Lesotho, Madagascar and a number of African countries were already exploiting.