Governor of the Central Bank of Nigeria (CBN), Godwim Emefiele has recounted the reason why the apex bank had to take measures to drive Nigeria’s economy away from only oil sector.
“The over 60 percent drop in crude oil prices we witnessed between 2015–2016 and its attendant effects on economic growth, inflation and our external reserves, provided further impetus on the need for the CBN to support measures that will drive productivity in critical sectors of the economy, while also weaning our economy from its dependence on imported goods.”
Emefiele, who spoke today, Tuesday in Abuja, at the Textile Stakeholders meeting, recalled that when he assumed office in 2014, he made it clear that his focus would be on building a Central Bank that would devote its energies on building a financial system that would serve the growth and development of Nigeria.
The speech goes thus:
In addition to a focus on key macroeconomic concerns such as moderating inflation and maintaining exchange rate stability, we also feel that the Central Bank of Nigeria must play a more constructive role in supporting Nigeria’s economic development particularly in the Agric and Manufacturing sectors, given the constraints faced
by rural farmers, SMES and Manufacturing companies. Our reason for adopting this posture rest on the believe that, addressing impediments to their growth, will not only strengthen economic growth, but will also enable the creation of more jobs and foster a more inclusive society.
The over 60 percent drop in crude oil prices we witnessed between 2015 – 2016 and its attendant effects on economic growth, inflation and our external reserves, provided further impetus on the need for the CBN to support measures that will drive productivity in critical sectors of the economy, while also weaning our economy from its dependence on imported goods.
Following a series of steps embarked upon by the CBN which include, a tighter monetary policy regime beginning in 2016; the establishment of the
Investors and Exporters Window in April 2017; restriction of access to forex for 41 items that could be produced in Nigeria; and the deployment of our agricultural intervention programs to support improved cultivation of particular agricultural items such as rice, tomatoes and fish, the Nigerian economy has made considerable progress.
After five quarters of uninterrupted GDP contraction (beginning from 1st Quarter of 2016), the economy exited from the recession during the second quarter of 2017. The recovery has been sustained for seven consecutive quarters.
The pace of quarterly GDP growth has improved from .5 percent in the second quarter of 2017 to 2.38 percent in the fourth quarter of 2018. Our FX reserves today stand at above $43billion, up from $23 billion in October 2016 and inflation has dropped from its peak of 18.17% in January 2017 to 11.3 percent in February 2019. Following a successful general elections, our Foreign Investor friends have began to show interest in Nigeria again, given their confidence of a stable business environment. Noticeable declines have been recorded in our monthly food import bill which declined from US$665.4 million in January 2015 to US$160.4 million as at October 2018; a cumulative fall of 75.9 percent and an implied savings of over US$21 billion on food imports alone over that period.
A lot of progress has been made, but at the same time more needs to be done in order to ensure that we build an inclusive economy that supports domestic production of goods and services, while offering job opportunities to teeming Nigerians.
This is the only option that we have, if we are to insulate our economy from volatility in the crude oil market and in the global financial markets. In order to achieve this goal, the CBN together with other critical stakeholders recently identified key commodities and products such as textiles and palm oil that have the ability to support the creation of hundreds of thousands of jobs in our economy.
As you are aware, in the 1970’s and early 1980’s, Nigeria was home to Africa’s largest textile industry, with over 180 textile mills in operations, which employed close to over 450,000 people. By today, if we had nurtured and encouraged the textile industry, that sector will be employing millions. The textile industry at that time, was the largest employer of labour in Nigeria after the public sector, contributing over 25% of the workforce in the manufacturing sector. This industry was supported by the production of cotton by 600,000 local farmers across 30 of Nigeria’s 36 states. This sector supported the clothing needs of the Nigerian populace, as our markets were filled
with locally produced textiles from companies such as United Textiles in Kaduna, Supertex Limited, Afprint, International Textile Industry (I.T.I), Texlon, Aba Textiles, Asaba Textile Mills Ltd, Enpee and Aswani Mills amongst several others.
It’s no secret that the past 20 years have been very difficult for many textile firms. They have faced rising operating cost and weak sales due to high energy cost, smuggling of textile goods, and poor access to finance.
Many of them have had to lay off employees. Today, most of the factories mentioned have all stopped operations, as only 25 textile factories are
operating today at below 20 percent of their production capacities, and the workforce in Nigeria’s textile industry stands at less than 20,000 people. In addition, the cotton growing sector has gone dead, thereby depriving thousands of small holder farmers the opportunity to earn a living. Furthermore, a large proportion of our clothing materials are imported from China and countries in Europe. At this stage, we intervened to redirect our focus to the important role the textile industry played in our country. They did more than produce cottons and textiles, they helped in sustaining the vitality of the neighborhoods in which they operated.
With the death of these industries, came a rise in unemployment, insecurity and other negative social vices.
Today, Nigeria currently spends above $4 billion annually on imported textiles and ready-made clothing. With a projected population of over 180 million Nigerians, the needs of the domestic market are huge and varied, with immense prospects, not only for job creation, but also for growth of the domestic textile industries. One quick example that highlights the potential of this local market, includes the need to support provision of uniforms and clothing apparels for school students, military and paramilitary officers as well as workers in the industrial sector.
In addition, when we consider the amount spent on outfits for religious and social events such as weddings, naming and funeral ceremonies on a weekly basis, the potential market size is well over $10bn annually.
Ladies and gentlemen, we are here to change this narrative today. I believe that if the CBN along with other critical stakeholders are able to address some of the challenges facing this key industry, given the high domestic demand for textiles, we will be able to create jobs for our economy, while increasing production of textiles in Nigeria.
The issues we will be discussing today are critical to everyone with an interest in the success of our nation’s textile industry and by extension our economy as a whole.
As a result, I would urge stakeholders here today to think carefully about how, in the current economic environment, our nation can best provide operators in the textile industry with the support they need to revive their factories and expand job opportunities.
On our part, we have decided to implement a few steps which we believe will support the revival of the textile sectors. These steps include;
- Financial support to Textile manufacturers with the provision of funds at single digits rate, to refit, retool and upgrade their factories in order to produce high quality textile materials for the local and export market
- Effective immediately, the CBN hereby place the access to FX for all forms of textile materials on the FX restriction list. Accordingly, all FX dealers in Nigeria are to desist from granting any importer of textile material access to FX in the Nigerian Foreign exchange market. In addition, we shall adopt a range of other Strategies that will make it difficult for recalcitrant smugglers to operate banking business in Nigeria. The details of those strategies will be unfolded in due course.
- We shall, initially support the importation of cotton lint for use in textile factories, with a caveat that such importers shall begin sourcing all their cotton needs locally beginning from year 2020.
- As part of its Anchor Borrowers Program, the CBN will support local growers of cotton to enable them meet the needs of the textile industries in Nigeria. The CBN shall also support efforts to source high yield cotton seedlings so as to ensure the yields from our cotton farmers meet global benchmarks.
- As regards provision of stable electricity, the CBN shall support the creation textile production centers in certain designated
areas in Nigeria where access to electricity shall be guaranteed. In 2016, the CBN began discussions with the Kano and Kaduna State Governments to establish textile industrial areas in a bid to guarantee stable electricity in those industrial areas. We would intensify efforts with these governments and others that may show keen interest to see to the quick actualization of such programs.
- We believe that these measures will discourage smuggling, resuscitate this critical industry, and support your efforts at creating jobs for Nigerians.