MON, MARCH 18 2019-theG&BJournal-The Lagos Chamber of Commerce and Industry (LCCI) has hit out on the Central Bank of Nigeria’s (CBN) policy on the exclusion of all forms of textile materials from the forex market (in both official and unofficial windows), saying that the policy move has grave implications for businesses in the fashion, tailoring, fashion accessories and garment industry in the country.
The CBN early March 2019 announced a package of measures aimed at tackling the importation of textile products into the country, creating a level playing field for Nigeria’s textile producers and regenerating the sector. This included a plan that restricts FX dealers from granting any importer of textile material access to FX in the Nigeria foreign exchange market. The apex bank estimates Nigeria currently spends $4 billion to import textile materials annually.
But the LCCI said yesterday it did not think it is in the best interest of the hundreds of thousands of women and men making a living in the marketing of textiles.
‘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 LCCI reminded the CBN.
The textile sector is currently valued at about N5 trillion, creating almost 500,000 jobs. The industry provides significant value addition to fabrics, whether imported or domestically produced.
‘’The policy makers cannot afford to ignore this segment of economic players. The policy contemplation of the CBN will put all of these at risk,’’ said Muda Yusuf, director general of LCCI, who presented the Chambers position.
According to the LCCI, trading in textiles is also a major economic activity in the country, both in the northern and southern part of the country. It is a market that responds to changing tastes and fashion trends in the country and beyond.
‘’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.’’
LCCI notes that Nigeria is clearly the leader in Africa as far as the fashion industry is concerned and suggests that the range of fabrics produced by the Nigerian textile industry cannot support the fashion industry in terms of the quantity and quality.
‘’This vibrant industry should not be sacrificed on the altar of textile industry regeneration,’’ the Chamber argued.
The LCCI says their position underscores ‘’the importance of a strategic approach to industrialization’’ and not to diminish the importance of textile industries in anyway or the significance of industrialization.
In their view, the starting point is to strengthen the capacity of domestic industries, enhance their competitiveness, and reduce their import dependence as espoused in the Nigeria Industrial Revolution Plan (NIRP).
‘’More importantly the power issue needs to be addressed. It is almost impossible to achieve rapid industrialization without resolving the issue power and the deficit in key infrastructures. Textile production is energy intensive. This is a high energy cost environment and it is very difficult for any energy intensive sector to survive.’’
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,’’ LCCI said.
LCCI’s major concern is that compelling the citizens to pay exorbitantly for systemic inefficiency is not an appropriate policy option.
‘’Such disposition imposes high welfare cost on the citizens, promotes unethical practices in the economy, promotes the growth of underground economy, leads to loss of revenue to government, and results in job losses. It is an economic management model that is repressive and not sustainable.’’
According to the Chamber, the key to sustainable industrialization is to focus on competitiveness, anchored on resource-based industrialization. Robust incentives and concessions should be made available to our industrialists. The move to create special economic zones in the six geopolitical zones in the country is a step in the right direction. The bank of Industry has also done a great deal to provide funding for industries, textiles inclusive. But we need to deal with the fundamentals.
The LCCI also reminded the CBN of what is contained in the fiscal policy document. It said the 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.’’
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