The Textile Industry
The textile industry in Nigeria has seen better times in the past, but rescue is now at hand. The Federal Government, through the Minister of Commerce and Industry, Charles Ugwuh, has promised to disburse N70 billion textile industry resuscitation fund next month, April 2008. The minister said the major factors facing the industry include the use of obsolete equipment and lack of capacity in the use of polyester.
I sincerely hope that they will do something about the run-of-the-mill performance of the power sector, which played a major role in militating against the profitability of the textile companies in Nigeria, which were once the major source of employment of labor in Nigeria. The issue of power has been over flogged in Nigeria and many Nigerians including myself have already given up hope on the resurrection of this moribund aspect of our social life. Many promises have been made and broken. Many billions of naira have been appropriated and misappropriated on the sector and it only seems to be getting worse by the day. The Power Holding Company of Nigeria, that we all know as power holders, are gleefully distributing pre-paid meters all over Nigeria, while at the same time making empty promises that it will go a long way in making things better for us. It just does not make a lot of sense for me. Giving us prepaid meter is like repainting a car with a bad engine or treating a headache secondary to cancer with paracetamol. The main issue has not been tackled and we are trying sort out a secondary matter. We have given up on them. We have resorted to buying generators and lately, inverters, while they toss us around like pieces of trash.
The article today is about the textile industry but it is impossible to talk about it without referring to the power sector, which plays a major role in making it vibrant. It just hit a raw nerve when the Honorable Minister did not consider it a top priority but rather believes that getting top of the line equipment will resolve the whole issue combating the industry. It will definitely go a long way but it will be a sorry situation when there is no power to run the equipment. It will also be poignant when the industries wake up and then roll out poor financial figures as in the case of Lafarge-WAPCO PLC who blamed their recent poor results on electricity problems.
Another factor that the Minister overlooked as a major factor is the problem of importation of textile materials. Although it is illegal but it is still happening and that we all know. The political will power is not there to eradicate it completely. As long as we have these products finding their way into the market, it will be difficult for the Nigerian textile companies to compete with them because of their high cost of production that will result from poor power supply. One of the ways to curb this menace is to legalize the importation of such materials but then place very high tariffs on them and then recycle the money generated to subsidize the ones made in Nigeria.
It will be a good idea for the government to study the market demand of textile products in Nigeria and then mandate the companies to sell their products at the price where their marginal costs will equate with the marginal benefits of the consumers. This price will provide a serious competition for the imported goods and will in the long run reduce them significantly. At this point the companies will run at a loss because of their high average total cost of production but a subsidy from the government that will be enough to give them economic profits will keep them in business, at least until the power sector is sorted out. There should also be legislation to allow easy entry into the industry so that when the time is ripe for the Government to lift the subsidy, there will be enough competition in the industry to keep prices reasonable and discourage resurgence of textile importation.
This is just my own opinion. There may be more information that is beyond the public domain affecting the industry that I am not aware of and I sincerely hope that the Minister of Commerce and Industry has done his homework well enough so that the N70 billion will not end up dropping into a bottomless pit and leaving the industry worse off in the long run.
We, Nigerians pray that the industry come back to life soon so that more employment can be generated for the masses. We, investors, also pray for the revival of the sector so that we can have more options for our money and not gamble with them as many have done.