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N52.5bn textile loans go bad

By on November 3, 2014

There are strong indications that the Bank of Industry may not recover over half of the N100bn Cotton Textile and Garment Intervention Fund established by the Federal Government in 2009 to aid the revival of the textile industry.

A BoI report obtained on Friday stated that as of August 2014, 70 companies had accessed N52.515bn from the fund. But so far, none of the borrowers has been able to fully repay the loans.

Our correspondent gathered that most of the loan beneficiary companies were currently under receivership as they could not service the debts.

The Director-General, Nigerian Textile Manufacturers Association and Nigerian Textile Garments and Tailoring Employers Association, Mr. Jaiyeola Olarewaju, said, “The loan was for a six-year period. This is the fourth year and people have not been able to repay. We are discussing with the BoI on the possibility of rescheduling the loan.

“The bank is already considering extending the payment period and reducing the interest rate.”

According to him, indigenous textile manufacturers are dealing with a number of problems, chief among them being the influx of smuggled and imported fabrics into the country.

He noted that even though there was a ban on the importation of printed fabrics, 80 per cent of the printed fabrics in the country were not made in Nigeria but smuggled in.

Olarewaju added, “It has really affected the level of production of our members. Most of the textiles are smuggled in from China. Even politicians are producing clothes from China. Their fabrics are cheaper, not in terms of quality but in terms of price.

“They bring them in duty free and it is difficult for us to compete with their prices. If you see a Nigerian fabric being sold for N2,400, you will see a Chinese one that is sold for N1,400.

“The worst thing is that they fake our designs. At the edge of the Chinese fabrics, you will see, ‘Made for Nigeria’, with the logo of a Nigerian company on the fabric. When these poor quality fabrics start running, buyers will naturally assume that they bought poor quality fabrics made by Nigerians. They have bastardised the market and spoiled the names of the companies producing the fabrics.

“Contributing to the high cost of production is the problem of infrastructure. Diesel sells for N150 per litre and factories require 24 hours of electricity to function. The price of black oil and other raw materials have increased by 200 per cent and we cannot pass the cost to our consumers because the market is already saturated with cheap fabrics.”

Olarewaju’s account was corroborated by the BoI and the Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf.

The BoI noted in its report that in addition to the listed problems, government’s incentive schemes such as the Export Expansion Grant were not being redeemed as anticipated.

According to Olarewaju, the grant has not worked in the last two years.

“People export, put up claims and don’t get paid. Last February, the Minister of Finance told us that the claim was so huge that the Federal Government may not even have enough money to pay all. Meanwhile, in anticipation of the claims, some of the manufacturers went ahead to sell at a loss of 10 per cent, hoping to get 30 per cent and mop up whatever losses they were making,” he added.

Another major problem confronting the industry is the insecurity in the northern part of the country.

“Fabrics produced from here go out of the country through Maiduguri, which has an international connection with Niger, Chad, Mali and others. But now, with the insecurity problem in that area, people cannot sell,” Olarewaju said.

While the Chairman, Trade Promotion Board, LCCI, Mr. Michael Olawale-Cole, posits that intervention funds should not just be about doling out money but motivating the economy to do better than it is currently doing, Yusuf said the impact of the funds could not be felt because of existing gaps in the system.

He said, “It is a big issue and it can only be addressed in a multidimensional way. Unless these industries are competitive, there is not much progress we can make. And it is not only money that will make them compete, it is the totality of the environment.

“Government should work on creating an enabling environment that will reduce their cost of production and make them more productive and competitive.”