Charles Nwaoguji
Barely two months after the Central Bank of Nigeria (CBN) added textile materials to the items not eligible for foreign exchange (forex) from the official windows, an industry stakeholder has attacked the decision.
The Director General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the exclusion of textile sector from the forex market is not part of the apex bank’s brief, but inter-ministerial responsibility.
According to him, CBN should rather concern itself with monetary policy matter as the boundaries of monetary policy is properly defined.
His words : “Monetary policy is about managing liquidity [or money supply] to influence the direction of credit, exchange rate and inflation. Trade policy formulation is not within the remit of the CBN. It is an inter-ministerial responsibility involving the Finance, Budget and Planning, Industry, Trade and Investment ministries. The fiscal policy document clearly outlines import and export prohibition lists. The tariff book also defines the various tariff measures applicable across sectors and range of products with relevant HS codes. An import adjustment tax is imposed on selected products to protect local industries. The tariff regime typically has a life span of seven years to ensure stability and consistency. The private sector would like to see minimum policy shocks as the administration steps into the next level.”
On March 5, after a meeting with stakeholders in the textile industry in Abuja, the CBN Governor, Mr. Godwin Emefiele, added all forms of textile materials to the list of items that are not eligible for foreign exchange from the official windows with immediate effect.
He lamented that a whopping $4 billion was spent annually on importation of textile materials into the country, adding that the decision was critical towards reviving the moribund sector and creating jobs for Nigerians.
He, however, pledged the apex bank’s financial intervention for the textile manufacturers with the provision of funds at single digit rate, to refit, retool and upgrade their factories to enable them produce high quality textile materials for the local and export market.
Yusuf, in a chat with Daily Sun,said the forex restriction would put about N5trillion investment at risk.
His words: Textile sector is estimated at N5 trillion, creating about 500,000 jobs. The industry provides significant value addition to fabrics, whether imported or domestically produced. The policy contemplation of the CBN will put all of these at risk. In the meantime, as we progress to the next level of the Buhari administration, policy coordination and collaboration among the economic ministries and agencies is imperative. There should be collaboration and coordination between the CBN, the Finance Ministry, Budget and Planning, Trade and Investment on trade policy issues. The boundaries of monetary policy need to be properly defined. Exclusion of sectors from the forex market is not a monetary policy issue. It is trade policy matter.
“Monetary policy is about managing liquidity [or money supply] to influence the direction of credit, exchange rate and inflation. Trade policy formulation is not within the remit of the CBN. It is an inter-ministerial responsibility involving the Finance, Budget and Planning, Industry, Trade and Investment Ministries. The fiscal policy document clearly outlines import and export prohibition lists. The tariff book also defines the various tariff measures applicable across sectors and range of products with relevant HS codes. An import adjustment tax is imposed on selected products to protect local industries. The tariff regime typically has a life span of seven years to ensure stability and consistency. The private sector would like to see minimum policy shocks as the administration steps into the next level.
“Textile industry in Nigeria used to be a large and flourishing industry and contributed enormously to the country’s employment generation, Gross Domestic Product (GDP), government revenues and non-export earnings . Local textiles from Nigeria constituted important exports to neighbouring African countries, Europe, the Far East and U.S.
“Today, the products are no longer competitive anywhere in these markets. It is regretable that inability of the Nigerian textile industry to take advantage of duty free exports to the U.S., encouraged by the its African Growth Opportunity Act (AGOA).
The industry used to employ over 300,000 workers when all the textile mills in the country were functioning, but the nation got it wrong by opening the market to cheap textile materials from some foreign countries. This killed the local industry.
The recent pronouncement by the Central Bank of Nigeria (CBN) on the exclusion of all forms of textile materials from the forex market (in both official and unofficial windows) gave grave implications for businesses in the fashion, tailoring, fashion accessories and garment industry in the country.
“The textile industry has been a beneficiary of several fiscal incentives and protectionist measures over the years, yet it has remained in stagnation. Some of them have even gone into receivership as they could not repay their loans. The lesson is that we should deal with the fundamental issues of production competitiveness in our economy. The textile industry needs to be saved from the excruciating burden of high operating and production cost.
“Trading in textiles is also a major economic activity in the country, both in the northern and southern parts of the country. It is a market that responds to changing tastes and fashion trends in the country and beyond. Hundreds of thousands of women and men make a living in the marketing of textiles. The policy makers cannot afford to ignore this segment of economic players. The traders are the bridge between the producers and the consumers. It is therefore very important for policy makers to take into account the full ramifications of the consequences of policies and collateral outcomes.”