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The Nigerian Textile Industry and Cheap Chinese Products

I read in BusinessDay yesterday that the investment bank arm of the United Bank of Africa Group has been asked by the federal government to source 70 billion naira through bonds of five year duration (didn’t say exactly which type of bond in the news article). The money is the Textile Development Fund that was first approved by President Obasanjo close to the end of his tenure. It will be given to the Nigerian Export Import Bank (NEXIM) for further lending to the people in the industry.

Mr Jaiyeola Olanrewaju, the Director-General of the Nigerian Textile Manufacturers Association told the Punch Newspapers that the original amount was 50 billion naira, but that the government was convinced that the textile industry needed raw materials so 20 billion naira was added for the cotton industry

What does this mean, really?
Well, we have a history of the use of import prohibition as a trade policy instrument. Just take a look at the list of prohibited items and you will understand what I mean. However, the main complaint made by textile manufacturers is that cheap Chinese products are pricing them out of the market. Most people don’t really know, but the importation of textile products is banned in Nigeria, but most of the textile materials you find in Nigeria are foreign products- the DG of the Nigerian Textile Manufacturers Association says it is 80%; he even goes on to say that 90% of that 80% are Chinese products. It is due to the socio-economic practice formally known as smuggling. I really don’t know what to make of this as yet, but my impression is that there is no way to stop the smuggling of textile products into Nigeria. And this is not because Nigerians love foreign made products – a lot of the cheap Chinese-made textile are of really poor quality so I don’t think it would count in the ‘good foreign products’ book – but because they are cheap and affordable. If the local industry can match the prices of the Chinese made products I am sure that Nigerians will buy them. The other thing is that people want to have the right to choose what they wear, and the imposition of ban on the importation of what would constitute a choice for them would simply not be welcome.

Getting realistic
I understand the point of import prohibition for the protection of the local industry, but at the same time it is apparent that the local industry is so small that it is unable to cater to the needs of the populace. I think that the way to go is to actually accept the fact that the cheap Chinese products are in the market, and that they will remain a viable competition for the local textile industry. This acceptance should be factored into the ongoing restructuring of the textile industry.

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By loomnie – March 13, 2008

  • Mr. Peter
    pls how can i know the production location of hitarget wrapper material?
  • Ets Ekmeres Cie Ltd
    Gentlemen,
    We are looking for Manufacterer of Stockings in Nigeria for immediate order of School Pupils Stockings
    Regards
    Okala
  • oxytech
    Read through and Quite obvious:

    Cost of production(taxes, electricity, labour, modern technology, funds, etc) is lower in china, thus cost of product is cheaper.

    The larger % of consumer that patronises the "Ankara" prints want cheaper products.

    The China quality might not be the best, but the quality received for this cheap price is acceptable to the consumer i.e. the consumer is willing to overlook the poor quality because of the very low price.

    The "Ankara" prints are regularly bought for ceremonies (group representation) and consumer is planning to use it just once or twice, and not flog it, so the advantages of a good quality product (colour,wear&tear,feel, etc) after repeated use is unnecessary.

    GDP is crashing in Nigeria and inflation is shooting up thus less spending money, so consumer can only afford cheaper products.

    Why spend 2000 for product that last 3 mths than spend 10000 for a product that last 4yrs.
    Answer: I can only save 2000 in a year!

    With foot dragging, corrupt, insincere ruling class etc, cost of production will never be cheaper than China in the near future - CHINA PRODUCTS HAVE COME TO STAY!
  • Momodu, I.M
    Nigeria is traditionally rich in textile weaving. There is the need to encourage local "traditional" textile cloth weaving and manufacturing. It is environmentally friendly, generates employment in the rural as well as urban areas, it is highly durable and stress free when it comes to import restrictions. All we need is the will power like the Indians, Chinese etc who no matter what prefer their home made products. To me if Nigeria cannot cloth herself, let her go naked; if she cannot feed herself let her go hungry
  • Peter
    I am very passionate about this textile issue becuase i am a shareholder of the only surviving textile company on the stock exchange i.e. United Nigeria Textile PLC (UNT PLC).
    Personally i don't believe that China is the problem but it looks more like a case of dead management on the part of most textile firms in Nigeria. The average Nigerian textile company complains from now till heavens come about the Chinese but have you ever seen any textile advert in the last 5 years or more in Nigeria? No. Interestingly companies like Asokombo in Ghana which surprisingly is owned by the same Chinese management i.e. CHA group of China who run UNT PLC in Nigeria (the Kaduna plant of this company closed last year) runs advert in Ghana to create awareness for their product. I wonder how people will buy what they don't know about, it seems textile firms don't understand the power of marketing and advertising their products.
    Textile firms also complain about cheaper chinese products, like a comment on this site there is nothing wrong with textile companies producing cheaper Ankara (which is what most of them make anyway) for the masses and equally create a high end product for the top end market.
    Textile firms also raise the issue of high cost of funds from banks, this also shows that the management of most of these companies are either asleep or not in tune with reality. A big company like UNT PLC for example(with a turnover of almost 20BN last year) and reputed to be the biggest textile firm in West Africa should not have any problem rasing money from the Nigeria Stock Market since they are quoted. If smaller companies with turnover of less than 2BN can be raising money from the stock market i wonder what the textile firms are waiting for.Instead the average textile company is busy waiting for the Nigeria govt. to come to teir rescue with loans packaged for them.
    In conclusion i agree that the textile firms have problems with infrastructure, multiple taxation e.t.c but their management should also sit up and be proactive in their approach to solving their problem. They should do what other well run companies are doing i.e. marketing, differential products for differenct market segment i.e. low end and upper end, equally look at other ways of sourcing funds i.e. the stock market.
  • Well anyway... it didn't get into the market until about 2003.
  • oh gosh.
    no never heard of Hitarget before.
    *cries about my ignorance*
  • @Random African: Of course! Ever heard of Hitarget and its various incarnations?

    @SolomonSydelle: Yea, it would have been nice if we were discussing real policy issues, wouldn't it? And it would have been beautiful if we could have access to those who have thought about this. But that is the beauty of blogs isn't it? In this sphere we can discuss things as they occur to us.
  • @ Random African: I can't help myself so I will simply say it. "Well, duh!" of course it could make Chinese products cheaper but let's not miss the point. The point is to make Nigerian products competitive with Chinese products because aas Loomnie stated, 'Made in China' products aren't going anywhere. To me the issue is having an opportunity to compete. Your suggestion about switching approach to higher end textiles is a smart one that I hope the 'powers that be' have factored that into the equation cause it would make a world of difference. And GAP wouldn't do anything in Nigeria with the lack of infrastructure and security. Just not worth it.

    @ Loomine: To get around the slow struggle to adequate infrastructure, the government (state/federal/local) must make it easier for average Nigerians to get stuff done. For instance, no tarriffs on importing solar panels or windmills to be used in commercial manufacturing, less taxes or subsidizing manufacturers who purchase diesel/petrol. That could however, affect tax revenue for the government but, in the long run would allow for the creation of local industries that can compete (hopefully), and generate more revenue that can be taxed/tapped into.

    Anyway, I again say thanks for raising this. Reading the comments is helping to think through some of the issues. But, it also is frustrating that we are even having this conversation (though needed) because I know that there are people who have already figured out possible solutions and we should be able to call someone up and find out what, if anything, the government and other leaders in Nigeria plan to specifically do to remedy the situation. I wish we were discussing the merits of the PLAN that elected officials will implement. Thanks nonetheless.

    NIGERIAN CURIOSITY
    IT WAS SO MUCH EASIER WHEN I ONLY HAD ONE...
    @ Loomnie:
  • ok.

    So do the chinese produce african prints ?
  • That is probably because most of the products they make are African prints, popularly referred to, around here, as Ankara. I dont think Gap makes many of their products with such fabric.
  • I don't get it.
    Why is the nigerian textile industry suffering if their product is so great ? Why aren't they exporting ? Why isn't Gap rushing to Nigeria to produce its shirts ?
  • Random African, I don't think anything prevents Nigeria from doing that... the only thing is that it is exactly what they have been doing, according to the traders I spoke with. And that is the reason they have refused to stock Nigerian products.
  • Solomon, proper roads to transport goods to the ports from where they can be shipped will make chinese products even cheaper !

    Loomnie, what prevents Nigeria from specializing in higher end textiles ? The small size of the local market for such products can be easily compensated by exports, right ?
  • SolomonSydelle, thanks for the comments. My conclusion was not that we should accept our powerlessness in the face of Big China, it was the acceptance that cheap Chinese textile products are available in the market, and that it is going to be really hard to make sure that they doe not get in the market. I said that if one accepted that then one would start thinking about real solutions to the problem of the textile industry.

    Thanks for mentioning infrastructure. It is really true, cost would be driven really down if infrastructure were better than than they are. And I join my voice to yours, and those of others, to cry for better infrastructure. Now, given the fact that infrastructure are not built overnight what does one do to help the textile industry? The move towards microfinance with the loan is definitely a move in the right direction, but what more should the government do? I really do not have the answer(s).
  • I have to disagree with your comclusion of simply accepting that Chinese goods 'rule' the market. A viable alternative to importation bans is to improve the national infrastructure. Think about what it takes to create textiles that Nigerians will buy and can even be exported to other African countries and other continents. The failure to provide consistent electricity, water, proper roads to transport goods to the ports from where they can be shipped, the corrupt police officer that puts up the illegal roadblock to be 'settled', all these and other factors prevent Nigerian enterpreneurs from becoming efficient and successful. In turn, crippling various domestic industries and forcing dependence on oil as the main source of national income, fostering continued poverty. So, I think that in addition to understanding that Chinese products (some good, some not good quality merchandise) is cheap, there needs to be continued and faster drives to get infrastructure up to modern day standards so that naturally ingenious Nigerians can provide for themselves.

    I will say the push towards microfinancing is definitely a good one and if observed properly will help lift some Nigerians from poverty. However, nothing will move Nigerians forward if the basic needs that they depend on teh government for - electricity, water, education etc - are not provided.

    Thanks for this topic, I was thinking about a related issue earlier today.


    NIGERIAN CURIOSITY
    IT WAS SO MUCH EASIER WHEN I ONLY HAD ONE...
  • No, I don't think it is necessary to make products of a wide range. But I am wondering what particular category of products Nigeria's economic structure would make more profitable for the textile industry. I talked to some textile traders at Dantokpa market today, and they told me that Nigerian textile was about the best in the market, but the reason they stopped stocking it was because buyers found the lower quality but also lower priced Chinese products more appealing for their budget. I think the Chinese share is really big. See, if you come to the market here in Cotonou that is what you are going to find most stocked. And Cotonou is one of the greatest suppliers of the Nigerian textile market.

    I went further to aske the traders whether they thought Nigeria should make some lower quality and cheaper products; they told me that Nigeria could never make it cheaper than the Chinese, because of cheaper cost of production.

    The textile industry remained one of the good non-oil industry Nigeria had, so maybe being protectionist in the right way would not be a bad idea... and by extension, maybe one should add a bit of subsidies to the plate too. Or else, cheaper Chinese products are still going to under-price them.
  • Yeah, import licenses created many overnight millionaires in Nigeria.

    I don't know if it's important to make products of a wide range. I mean what's wrong with specializing. What if Nigeria's economic structure makes it more adept at a particular category ?

    As I thought about it, I doubt the Chinese share is that that big. Well, direct chinese impors at least. One thing I thought about was how the western second-hand products aare a big part of the lower end textile consumption. The other thing is that Nigeria is not Congo. There is a market for local textiles. Of course, it's often high-end traditional clothing but still.

    Oh and another thing. I think the issue is not so much the long list of prohibited items but the incentive structure behind them. Lately there's been talk of how Korea was protectionist and it worked but people fail to mention that firms that exported, proving their ability to compete on international standards, were rewarded. Without those incentives, they would have ended up with another Nigeria really.
  • Random African, thanks for your comments. A Nigerian professor of economics told me that the easiest way to make a millionaire in Nigeria is through import prohibition. Prohibit the importation of a particular product, then give the franchise to one company and you make a millionaire. That is one of the reasons I plan to take a closer look at trade policies. Some actually rumour this about Nigeria's contribution to the billionaires club, Dangote.

    Yea, it would be important for Nigerian textile manufacturers to think of making products of a wide range, from really high quality products that can compete with Dutch fabric, to the really cheap ones that compete with Chinese products.

    You are also right when you say that the rise of Chinese textiles is fairly recent. I may have to go deeper into the literature on the Nigerian textile industry, but one can safely say that the industry didn't fair very much amidst oil boom, post oil boom structural adjustment and general mismanagement of the economy under continual military rule.
  • Prohibited ? Gosh, that's extreme. Usually country just have tarriffs. (there is an argument about taxation being more efficient than prohibition)

    That said, may be Nigeria textile manufacturers should concentrate on making cheaper products or increasing quantity ? I mean that is an option to avoid being underpriced, no ? The rise of chinese textiles is fairly recent. Was the market share of imported products lower before ?

    But back to the list, toothpicks ? sanitary wares of plastic ? Electric generating sound proof casings ? Do items get put on the list because someone in Nigeria manufactures them ?
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