Why Nigerian textiles are not competitive in African market?

By

Suraju Abiodun Aminu, PhD.

Department of Marketing,

Lagos State Polytechnic, Ikorodu, Lagos, Nigeria.

Email: asabiod2001@yahoo.com

Abstract

The paper explored major challenges that undermine competiveness of Nigeria's textiles
in the African regional market, adopting Porter Diamond Model as a theoretical
framework. Review of literature showed that high costs of production, inordinate textile
importation from Asia and prevalent use of obsolete technology in the industry
considerably undermine the competitiveness of Nigeria's textiles in the regional market.
It is concluded that Nigeria's textiles are not competitive in the regional market because
of these ingrained problems. Based on this conclusion, it is recommended that patriotic
and concerted efforts be made by the Buhari Administration to: upgrade and expand the
country's infrastructure to increase productivity, quality and reduce production costs of
textile products; and attract leading Asian textile firms to the Free Trade Areas (FTAs) in
the country to encourage export production and reverse the excessive importation of
textiles.

Keywords: International competitiveness, international trade, textiles, Nigeria and

African regional market.

This paper can be cited as: Aminu, S. A. (2016). Why Nigerian textiles are not
competitive in the African market? Ilorin Journal of Marketing, 3(2), 133-143.

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1.1 Introduction

International trade (IT) referred to an exchange transaction and relationship involving

tangible and intangible goods between individuals, groups, firms and/or countries across
the borders. IT involves trade in goods and in services, with the bulk of trade taking place
in goods (United Nation Conference on Trade and Development, UNCTAD, 2015).
"Both the traditional and new trade theories confirm that countries engage in international
activities because of the advantages that result from such activities" (Smit, 2012, p. 121).
Consequently, trade between countries across the globe has surged at the annual average
of 5.1% between 1990 and 2014 (Azevêdo, 2015), reaching $23.5 trillions as of the end
of 2013 (UNCTAD, 2015).

In contrast, analysis of data by National Bureau of Statistics (NBS) (2015) showed that
Nigeria's trade with its trading partners declined from $143 billion (N28 trillion) in 2012
to $122 billion (N24 trillion) in 2014, recording a 14% fall. NBS shows that textile was
not among the top 13 non-oil exports in the last quarter of 2014 and only South Africa in
Africa made the list of top 10 export destinations. Exports to Africa in 2014 constituted
12 per cent as against 43 and 29 per cent to Europe and Asia respectively.

Statistics by Simoes (2015) also showed that crude and petroleum exports constituted
over 91% of total value of Nigerian exports to the rest of the world in 2014. Textiles did
not make the list of top 20 exports and only three African countries: South Africa, Cote
d'Ivoire and Algeria made the list of top 20 destinations for Nigerian exports, accounting
for a mere 8% of total export value. Obviously, this is not good for Africa, because
international competitiveness is seen as mainly a regional phenomenon (Rugman, Oh, &
Lim, 2011). This implies that Nigeria should first exhibit her competitive strength in her
region, Africa, before competing in the more distant regions of the world.

The fact that the value of Nigeria's exports is small and even declined is not surprising
because it is noted that developing countries do not export as much as developed
countries and as a result, countries do not benefit equally from trade (Farole, Reis, &
Wagle, 2010). More worrisome is the by-pass of the huge African market by Nigeria's
firms for the U.S., Europe and Asia, and the poor export performance of local textiles in
the region. Internet World Stats (2015) estimated the population of Africa, as at June,
2014, at over 1.1 billion people. Besides, "exporting to, and/or importing from the Far
East, such as: China, Japan, and Korea are both physically and psychologically distant"
(Okusaga & Aminu, 2012, p. 13).

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Considering its population (estimated to be over 177 million by Internet World Statistics,
2015) and resource endowment, Nigeria and her various industries ought to be playing a
dominant role in the region just the way China has dominated the Asian market. We
argue that the textile industry with over 180 firms in the 1960s and 1970s (Anudu, 2013)
ought to have penetrated and be in control of the regional market with Nigeria's brands
while extending the market beyond the region. Sadly, this is not the case.

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 (Ebelo, 2013; Eneji, Onyinye, & Kennedy,
2012; Njoku, 2004). Local textiles from Nigeria constituted important exports to
neighbouring African countries, Europe, the Far East and U.S. (Popoola, 1989, cited in
Popoola, 2001). Today, the products are no longer competitive anywhere in these markets.

Popoola (2001) lamented the inability of the Nigerian textile industry to take advantage
of duty free exports to the U.S., encouraged by the U.S. African Growth Opportunity Act
(AGOA), 2000. Indeed, Nigeria is not among the six African countries that contributed
91% of exports by value to the U.S. under AGOA (AGOA in African Cotton and Textile
Industries Federation, ACTIF, 2010). South Africa and Mauritius have the largest textile
industries in sub-Sahara Africa (SSA) and dominate exports to the U.S., Europe and
Africa (Adhikari & Yamamoto, 2007). Njoku (2004) benchmarked Nigerian textile firms
with their counterparts in India, South Africa, Kenya and China and concluded that
factors costs in Nigeria are higher and make Nigeria's textiles uncompetitive. Aganga
(2013) in Ebelo (2013) admited that Nigerian economy has a problem of competitiveness
and noted that one of the goals of the recent Nigeria Industrial Revolution Plans (NIRP)
is to help industries, including textile to regain their competitiveness in Africa and the
world.

Therefore, an insight into the reasons for the poor performance of the industry in the
region is required. This is an exploratory study, explaining major challenges affecting the
industry's competitiveness. Onuoha's (2013) study on factors militating against the global
competitiveness of Nigerian manufacturing industry is too scanty and focused on
manufacturing industry and global market. This present paper examines three major
problems that have largely eroded the competitiveness of the industry in the regional
market. These problems include high costs of production (Anyanwu, 2000; Egbula &
Zheng, 2011), importation and smuggling of cheap textiles (Aganga, cited in Ebolo, 2013;
National Union of Textile, Garment and Tailoring Workers of Nigeria, NUTGTWN,
2015) and use of obsolete technology (NBS, 2011, COMESA, 2009). These conditions
have significantly constrained capacity utilisation in the manufacturing industries in

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Nigeria (Anyanwu, 2000; NBS, 2011) and made textiles in particular, uncompetitive in
the regional market.

It is sad that, in spite of the position of Nigeria as the 'giant of Africa' and of growing
world trade (UNCTAD, 2015), Nigeria's textiles are not competitive in the region.
Therefore, this paper reviews the contributions of the identified factors to the lack of
competitiveness of local textiles in the African market and suggests policy directions for
making the industry more competitive in the regional market and creating value for the
Nigerian economy. After all, it is suggested that manufacturing can be used in Nigeria as
"a tool for job creation and poverty reduction" (Egbula & Zheng, 2011, p. 14). The
contribution of this paper, at a time when Nigeria is facing a serious economic crisis
resulting from a crash in the international price of crude oil, is profound. The country
needs to diversify its export base and develops non-oil exports such as textiles. The
remainder of the paper covers literature review and conclusion.

2.1 Overview of the Nigerian textile industry

Textile industry is a first-generation industry in Nigeria (NUTGTWN, 2015). The

industry provides an industrialisation base for almost all countries (Traub-Merz, 2006).
Kaduna Textile Mills, established in 1956, was the first textile firm in the country,
followed by Nigeria Textile Mills in Lagos in 1962 (Jamie, 2007, cited in Eneji et al.,
2012). Other top textile mills in the country are Aswani Textile, Afprint, Enpee industries,
United Nigerian Textile Limited, Arewa Textiles, Five Star, etc. (Anudu, 2013;
NUTGTWN, 2015). Many of these mills have stopped production due to poor operating
environment in the country. COMESA (2009) identified this as a trend in most African
countries. The industry is labour intensive (Anderson, 2012; Traub-Merz, 2006),
dominated by the European and Japanese technology with Asia owning and managing
most of the firms (NUTGTWN, 2015). Due to the ban on importation of textiles, the
industry witnessed influx of many investors in 1960s and 1970s (Anudu, 2013) with
some of them in Kaduna and Kano pursued backward integration (Eneji et al., 2012).

By 1985, the number of firms in the industry peaked at 180 trailing only South Africa and
Egypt in Africa (Anudu, 2013), making it one of the largest industries in Africa (Egbula
& Zheng, 2011; Njoku, 2004). It employed about one million people (Osagie, 2013),
controlled 60% of market share in the country (Ebelo, 2013), accounted for over 60% of
the total capacity in West Africa (Osagie, 2015) and recorded an average growth rate of
12.5% in 1970s (Egbula & Zheng, 2011). It used to generate $2 billion annually across
the value chain (Osagie, 2013). This stemmed from the competitive advantage the
country enjoyed during the period (Emefiele, 2015, cited in Abioye, 2015).

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The crisis in the industry began in early 1990s and deteriorated in 1997, when a ban on
importation of textiles was lifted (Anudu, 2013). Obviously, this was not unconnected
with the Nigerian membership of World Trade Organisation (WTO) in 1995. Therefore,
due to the multiple challenges plaguing the manufacturing industry at large and textile
industry in particular, the productivity, efficiency and competitiveness of textile industry
has fallen (Aminu, 2013; Eneji et al., 2012; Odior, 2013) leading to descent in capacity
utilisation, closure of many factories and loss of many jobs (Egbula & Zheng, 2011; NBS,
2011). From 175 in 1980s, the number of textile firms in the country in 1990 plummeted
to a paltry 42 firms with many of them operating below 30% capacity (Njoku, 2004).

Successive governments had made efforts to revive the moribund industry. For example,
in September 2002, the Nigerian government placed a ban again on imported textiles,
granted the local textile mills a 10 per cent duty incentive, a 30 per cent export expansion
grant, a zero per cent value added tax and a zero per cent National Health Insurance Levy
(NHIL) (Quartey & Abor, 2011). In January 1, 2004, the Obasanjo administration
proposed a revival fund for the industry, but the fund only took-off in December 18, 2009
with the establishment of N100 billion Cotton, Textile and Garment (CTG) revival fund
by the Yar'Adua administration (Anudu, 2013). The initial interest was 6 per cent with a
maturity period of five years (Anudu, 2013; Bank of Industry, BOI, 2015). To make the
fund attractive to the potential textile firms, the interest rate has been reduced to 4 per
cent (Abioye, 2015). The BOI oversees the disbursement of the fund to textile mills (BOI,
2015). In November 2010, the government lifted and replaced the ban with tariffs of
between 10 and 20 per cent and levies of between 15 and 20 per cent (Gado, 2011).

In 2012, the Jonathan administration came up with a policy of reinvestment of the 20 per
cent levy on imported textile products for the development of the industry (Punch, 2015)
and inaugurated NIRP in January 2015 to speed up the nation's industrialisation process,
improve business environment and encourage patronage of local products (Federal
Ministry of Industry, Trade and Investment, 2015). The Ministry noted that the plan
focuses on the industries, including light industry where the country has a competitive
and comparative advantage. Textile industry belongs to the light industry (Anderson,
2012). NIRP makes it mandatory for government to establish integrated textile and
garment parks (ITGP) near raw materials, markets and infrastructures (Ogah, 2015).

While some have acknowledged that the policy interventions are impacting on the sector
positively, others held contrary views. For example, Osagie (2015) opined that the sector
has witnessed a rebound in the recent times, citing data by MAN as evidence of this. The
data indicated that the average capacity utilisation of the industry jumped from 29.14 per
cent in 2010 to 49.70 per cent in 2011 (MAN, 2012, cited in Osagie, 2015). There has

5
been disbursement of over N60 billion of the N100 billion to 52 beneficiary textile mills
as at March, 2013; saving of 8, 070 jobs; increase in the capacity utilisation of most
beneficiaries from 40 to 61 per cent; and transformation of over 50 per cent of loss-
making mills to profit making (BOI, 2015). The fund also created new 5, 000 jobs
(Aganga, 2013, cited in Ebelo, 2013). With respect to NIRP, stakeholders are optimistic
that it would check the influx of imported textiles into the country, if properly
implemented (Ogah, 2015).

Conversely, others have bemoaned the ineffectiveness of these policy interventions in

reviving the sector. For example, NTMA (2015) cited in Punch (2015) noted that funding
is an insignificant problem of the industry, explaining that most of the surviving textile
mills are not enthusiastic to access the fund for fear of being unable to refund it, arising
from the existence of cheap imported textiles in the market. The major problems include
high costs of production (Anyanwu, 2000; Egbula & Zheng, 2011), importation and
smuggling of cheap textiles (Aganga, cited in Ebolo, 2013; NUTGTWN, 2015) and low
patronage of the industry by the governments and their agencies (Anudu, 2013). A study
summed the dire situation as follows: the expected positive impacts of the government
ban on imported textiles is undermined by lack of enabling environment within and
outside the textile industry in Nigeria (Bankole, 2004, cited in Baden & Barber, 2005).

2.2 Theoretical perspective on international competitiveness

Following the demise of the most renowned trade restrictive theory, the Mercantilist
theory, a number of theories have emerged to explain the importance and competitiveness
of trade between countries (e.g. Porter, 1990; Ricardo, 1817; Smith, 1776; Vernon, 1966).
Due to its emphasis on the national competitive advantage of countries and the fact that
Nigeria's manufacturing industry's loss of competitiveness in foreign market is as a result
of poor operating conditions associated with doing business in the country, this paper is
anchored on Porter's Diamond model.

Porter (1990) identified four main country attributes he describes as National Diamond -
factor conditions; demand conditions; related and supporting industries; and firm strategy,
structure and rivalry. These attributes provide leverage for a country's competitiveness in
international markets.

Though, the model has been attacked on the ground that nations do not compete on a
global scene (Krugman, 1991, cited in Smit, 2010), scholars have defended the model by
arguing that while it is true that nations do not compete, but they maintain that specific
locations provide specific firms and industries with competitive advantage/disadvantages

6
(Farole et al., 2010). The country attributes in the Diamond model are briefly explained
below.

Factor conditions: Porter (1990) identified two broad categories of factors that confer
competitive advantage on industries within a country. These include basic factors and
advanced factors. The basic factors referred to the inherited factors in a country and
include factors of production, e.g. cheap labour, vast natural resources, favourable
climatic conditions and good geographic location. The advanced factors referred to
factors that are created by the country and include highly skilled labour, infrastructure
and scientific base. Porter asserted that the country's position in advanced factors makes
target industries in the country more competitive in international market.

Due to the labour intensiveness of textile industry (Anderson, 2012) and abundance of
cotton in Nigeria in the past (Ntagu, 1997), the industry was competitive in the 1960s and
1970s (Emefiele, 2015, cited in Abioye, 2015). However, the low cost of labour in the
industry in Africa continues to adversely affect the quality of labour and productivity of
the industry (COMESA, 2009). This affirms Porter's (1990) position that competitiveness
of industries in a country requires more than natural resources of cheap labour and raw
materials. However, being a developing country, characterised by poor leadership,
Nigeria cannot create modern infrastructure that would give its industries, including
textile competitive advantage. Regrettably, little investment is made on national
infrastructure in the country (Aminu, Salau, & Pearse, 2013).

Demand conditions: According to Porter (1990), this referred to the size and character
of demand for an industry's product. Essentially, Porter noted that to be competitive,
home market should: have a considerable share of domestic market; envisage and control
a substantial share of international market; and should have sophisticated consumers.

Nigeria has a population of over 177 million people (Internet World Stats, 2015),
constituting a huge market for textile and other products. However, due to the low
purchasing power of many Nigerians, they demand for cheap imported textiles from Asia
(Eneji et al., 2012; Egbula & Zheng, 2011), making the demand less sophisticated and the
industry less innovative (Porter, 1990). In the past, local textiles accounted for over 60%
market share in Nigeria (Ebelo, 2013). Today, the market share is less than 20% of
domestic demand (Iroegbu-Chikezie, 2014). Thus, the industry does not meet any of the
three demand conditions in Porter's diamond.

Related and supporting industries: According to Porter (1990), there should be

existence of supplier and complimentary industries that are both locally and

7
internationally competitive and with a capacity to optimally serve an industry. Porter
argued that it is doubtful to have a successful single industry without vibrant
complimentary industries. He noted that these industries promptly and efficiently provide
a downstream industry with required raw materials, components and machinery.

In spite of the importance of textile industry to the Nigerian economy, the industry is not
supported by complimentary industries and institutions such as: cotton production, plant
& equipment, water, electricity and transportation. For example, total production of
cotton in Nigeria fell short of local demand by textile and oil mills (Ogunlela, 2004, cited
in Adeniji, 2007), the industry depended on Europe and Japan for the supply of plant and
equipment (NUTGTWN, 2015) and electricity is in deficit (World Bank, 2013). Also, the
industry lacks a strong downstream industry that can add value and produce a wide range
of fabrics for local and export markets. Smit (2010) regretted that lack of supporting
industries affect the productivity of industries in developing countries.

Firm strategy, structure and rivalry: This related to how a company is formed,
organised and managed, as well as the state of domestic competition (Porter, 1990).
Porter noted that the hierarchical structure of industries in Germany largely contributed to
the success of the country's heavy machinery industry. He also considered firm rivalry as
key to gaining competitive advantage in the local market.

Like in other industries in Nigeria, organisational structure is hierarchical in textile

industry, while competitive rivalry among the local competitors is mild. The local
industry has a small local market share (Iroegbu-Chikezie, 2014), while imported textiles
control the local market.

Smit (2010) concluded that highly competitive industries are associated with countries
with the dominant Diamonds. Unfortunately, Nigeria's position on each of the conditions
in the Diamond Model is weak and as a result, the textile and other industries in the
country are not competitive in foreign market.

2.3 International competitiveness and Nigeria's performance

Competitiveness is defined as "The ability of companies, industries, regions, nations and

supra-natural regional units to produce, with simultaneous exposure to international
competition, relatively high income and high level of employment" (European
Commission, EC, 1999, p. 75). Competitiveness is "The set of institutions, policies, and
factors that determine the level of productivity of a country" (Sala-I-Martìn, Bilbao-
Osorio, Di Battista, Hanouz, Galvan, & Geiger, 2014, p. 4). In this instance, functional

8
institutions, supportive and consistent policies and favourable factors are all enablers of a
country's competitiveness in the global market.

"Firm competitiveness affects industrial competitiveness and vice versa, while industrial
competitiveness affects national competitiveness and vice versa" (Lee, 2013, p. 12). Also,
country competitiveness in international environment relates to firm international
competitiveness (Herciu, 2013). In Nigeria's case, weaker institutions, inconsistent
policies and poor state of infrastructure have made the country uncompetitive and eroded
the competitiveness of most industries and firms both in the domestic and global markets.
The importance of competitiveness in the four corners of the world has been increasing
tremendously (Arslan & Tathdil, 2012).

Productivity is used synonymously with competitiveness (Farole et al., 2010; Porter,

1990; Sala-I-Martìn et al., 2014). This is because productivity is essential for achieving
competitiveness in international market (Adhikari & Yamamoto, 2007; Porter, 1990;
Saxena & Salze-Lozac'h, 2010). For example, Saxena and Salze-Lozac'h found that
productivity is a primary factor for achieving competitiveness in Bangladesh's textile
industry. Higher productivity increases the economic growth of a country (Anyanwu,
2000) and higher level of prosperity (Sala-I-Martìn et al., 2014; Smit, 2010).

Productivity of international firms can be increased through higher worker skills,

improved technology, upgraded product quality and cost reduction (Porter, 1990). High
skilled workers can increase productivity (Koch, 2014; Porter, 1990; Sala-I-Martìn et al.,
2014). Koch argued that high-skilled workers' productivity is higher than that of low-
skilled labour. Labour skills are enhanced by education and training (Adhikari &
Yamamoto, 2007). Efficient and highly skilled workers are essential to achieving
competitiveness in the African textile industry (COMESA, 2009).

Technology is also necessary for increasing productivity. Bangladesh, China, India,

Indonesia, Pakistan, Sri Lanka and Vietnam support and increase competitiveness of their
textile and clothing (T&C) industries through investment in technological upgrading
(Adhikari, 2006, cited in Adhikari & Yamamoto, 2007). Conversely, in Africa, outdated,
old and inefficient technology limits productivity of textile mills (Gherzi, 2003, cited in
COMESA, 2009). Innovation and product upgrading is also essential for productivity.
According to Farole et al. (2010, p. 6), "remaining competitive in a dynamic context
requires constant upgrading". Atkison (2013) argued that vigorous pursuit of innovation
helps productivity and competitiveness.

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Finally, lower cost of production can also impact productivity positively. Measures such
as costs per unit of labour, economies of scale and wage costs affect both productivity
and competitiveness (COMESA, 2009; Decramer et al., 2014; Truett & Truett, 2010).
Truett and Truett found that there are significant economies of scale in the South African
textile and apparel industries which offer opportunity for unit cost reduction, which is
necessary for the industries' growth. High costs of borrowing in Africa raise costs of
production and depress productivity (COMESA, 2009).

Therefore, increasing the productivity and competitiveness of textile and other industries
in Nigeria would depend on the interplay of the afore-mentioned productivity enablers in
the industries.

The World Economic Forum (WEF) Global Competitiveness Index (GCI) is an important
measure of international competitiveness of a country. GCI assesses factors that engender
productivity and competitiveness along 12 pillars, namely: institutions, infrastructure,
micro-economic environment, health and primary education, higher education and
training and goods market efficiency. Others are labour market efficiency, financial
market development, technological readiness, market size, business sophistication and
innovation (Sala-I-Martìn et al., 2014).

Overall, Nigeria was ranked 120th out of 148 countries in the 2013-2014 Index, while the
ranking fell to 127th out of 144 countries in the 2014-2015 Index behind smaller
countries like Ghana, Botswana, Kenya, Zambia, Algeria and Cameroon in Africa (Sala-
I-Martìn et al., 2014). The GCI showed that Nigeria was weak in institutional
development occupying 129th position; it occupied 139th position in security reflecting
the lingering insurgency in the North-Eastern part of the country; 134th in infrastructure
development; 143rd in health and primary education; and 137th in availability and
affordability of finance. Nigeria's position in affordability of funding suggests that the
country's financial system is anti-business. On the positive side, the index indicated that
Nigeria is rated 33rd in market size, reflecting its huge and growing population. Nigeria's
labour market efficiency is considered relatively high and is ranked 40th and occupied
20th position in flexibility.

In comparison to the smaller African countries, the Index shows that Nigeria is less
productive and competitive than some smaller African countries (Sala-I-Martìn et al.,
2014). For example, South Africa is the most competitive in SSA and occupied 56th
position in the world. The country has stronger GCI pillars: it is 36th in the quality of
institutions; 20th in protecting property rights; 9th in efficient regulatory and legal
framework; 15th in dispute resolutions; and 7th in financial market development. Kenya's

10
competitiveness improved in 2014-2015 from 96th position in the previous year to 90th
(Sala-I-Martìn et al., 2014). In particular, the country has stronger financial markets,
occupying 24th position; a more efficient labour market at 25th position; and
significantly strengthened institutions at 78th position from a distanced 123rd position
five years earlier. Finally, Ghana occupied 111th position on the ladder; 59th position in
institutional development and 54th position in protecting intellectual property rights.

These rankings suggest that South Africa, Kenya and Ghana offer a better business
environment than Nigeria. Therefore, their industries, including textile are most likely to
enjoy greater competitive advantage than their counterparts in Nigeria.

Why Nigerian textile products are not competitive in African market

This section reviews the three notable constraints affecting the competitiveness of
Nigeria's textile in both local and regional markets.

High cost of producing textile products

Generally, the high cost of doing business in most African countries hampers the growth
of textile sector in the region (COMESA, 2009). Due to the significant negative impacts
of infrastructure deficit and high cost of capital on operating costs in developing
countries, these two factors are emphasised in this paper.

Inadequate and poor quality of infrastructures is a major problem affecting the efficiency
and productivity of manufacturing industry in Nigeria (Anyanwu, 2000; NBS, 2011) and
raising the costs of doing business (Adhikari & Yamamoto, 2007). The quantity and
quality of infrastructures reduce the costs of doing business in a country (Asiedu, 2002).
"Unfortunately, infrastructure of all types is not well developed in Nigeria" (Aminu et al.,
2013, p. 69). As a result, industry such as textile collapsed partly because of
infrastructure deficit (Egbula & Zheng, 2011; NBS, 2011). Saxena and Salze-Lozac'h
(2010) found that poor infrastructure hinders Bangladesh's competitiveness.

Electricity is an important infrastructure necessary for efficient functioning of

manufacturing industries. However, MAN (2015, p.4) regretted that "the major challenge
is inadequate supply and exorbitant cost of electricity. Energy cost constitutes about 40%
of production cost". Inadequate supply has resulted in Nigeria being ranked 178th out of
185 in getting electricity (World Bank, 2013) because of the inability of the electricity
firms to provide the required electricity (Aminu, 2015).

Gado (2011) found that over 30 per cent of eight textile mills' capacity utilisation decline
in the North-West zone of Nigeria was due to poor electricity supply. Another research in

11
Ghana found that high cost of production and high wage bills were significant in
dwindling sales of local textiles in the country (Quartey & Abor, 2011). Also, results of a
survey of electricity insecurity in six low- and middle-income countries including Nigeria
indicated that 36 per cent of micro, small and medium enterprises (MSME) in Nigeria
rely on alternative sources of electricity for 1-5 hours a day; 37.4% generated own
electricity for 6-10 hours; 13.3% for 11-15 hours; and 13.2% for 15-20 hours (Scott et al.,
2014).

Generally, the electricity situation in SSA is abysmal with almost 600 million people not
having access to electricity (Castellano et al., 2015). However, the analysis of data on
electricity supply in SSA by World Bank Enterprise Survey (2015) showed that
electricity situation is much better in some textile-producing countries, thus giving their
industries greater competitive advantage than Nigeria. For example, the survey indicated
that there were about 33 power outages in a month in Nigeria in 2014 as against 4.9 in
Benin in 2009; 9.8 in Cameroon in 2009; two in Cote d'Ivoire in 2009; and 6.3 in Ghana
in 2013. There were outages in Nigeria for 8 hours a day as against 1.1 hours in Senegal;
1.2 hours in Mauritius and 2 hours in South Africa. The survey further showed that
70.7% of firms own or share generators in Nigeria as against 6.5% in Cote d'Ivoire;
11.4% in Ghana; and 28.3 in Burkina Faso.

Inevitably, textile firms in Nigeria depend largely on alternative power sources, which
place enormous financial burdens on them (Aminu, 2013; Anudu, 2013). Paradoxically,
in spite of electricity shortage, electricity charges have gone up in the country (MAN,
2015). Erratic power supply results in a large number of people generating their own
electricity (Aminu, 2013). It is estimated that N1.56 trillion ($13.35 million) is spent
annually to fuel generating sets (MAN, 2012, cited in Energy Commission Company,
ECN, 2012). High energy costs make manufacturing firms inefficient (Anyanwu, 2000),
less productive (Odior, 2013) and less competitive (Adenikinju, 2008; Anudu, 2013;
MAN, 2015). High electricity cost reduces competitiveness of local goods in relation to
the imported goods (MAN, 2015). Adenikinju suggested reduction in energy cost to
increase the overall competitiveness of the Nigerian economy.

Another important factor raising production costs in textile industry in Nigeria is high
cost of capital (Aminu et al., 2013; Odior, 2013; Onuoha, 2013). Lending rates from
commercial banks and other financial institutions in Nigeria are usually very high
compared to the prevailing rates in developed and emerging economies (Aminu &
Olayinka, 2007; World Bank, 2015). For example, lending rates in some textile-
producing countries in SSA are: Nigeria, 16.5%; Kenya, 16.5%; Lesotho, 10.3%; South
Africa, 9.1%; Botswana, 9.0%; and Swaziland, 8.1% (World Bank, 2015). Nigeria's

12
16.5% rate is an official data and may have been deliberately understated as the reality
indicates that banks in the country charge higher rates, 20% and above.

High lending rates in Nigeria increase the cost of capital, which in turn increases prices of
goods and services (Aminu & Olayinka, 2007). This would depress productivity in textile
industry (COMESA, 2009; Odior, 2013) because of lack of important investments
necessary to increase productivity (COMESA, 2009). The low productivity limits the
prospect of Nigerian textiles in foreign markets (Eneji et al., 2012). Odior found that
access to low cost credit can increase the productivity of manufacturing firms in Nigeria.
Therefore, African governments are advised to provide cheap funding and other
incentives to export manufacturers to increase their competitiveness in international
market (UN Economic Commission for Africa, cited in Mutume, 2006).

Importation of cheap foreign textiles

Asian firms currently dominate the world's textile market (Xiaoyang, 2014), plunging
T&C industry in SSA into turbulence by flooding the market with cheap imports from
Asia (Traub-Merz, 2006) and crippling the once thriving textile industry (Becker, 2014).
Asian mills derive their competitive advantage over the rest of the world largely from
low-labour cost and availability of cheap raw materials (United States International Trade
Commission, USITC, 2004). As a result, importation of T&C products from Asia,
especially China to Africa is very high and adversely affects the efficiency and
performance of local mills (Ngulu, 2014; Quartey & Abor, 2011; Traub-Merz, 2006;
Xiaoyang, 2014). "In some member countries, imports of new and used garments and
fabrics have captured more than 55% of the domestic market" (COMESA, 2009, p. 12).

Due to its size of the market, Nigeria has the largest dose of Asian textile imports effect
and this has strangulated textile industry in the country. China's textile imports to Nigeria
in 2010 was estimated to be 9% trailing only vehicles (11%) and electrical products (10%)
(UN Comtrade, cited in Egbula & Zheng, 2011). Following the lifting of the ban on
textiles by Nigerian government in 2010, the import value of textile items in the fourth
quarter of the year was N108.52 billion or 56.33% of the total imports value for the year
(NBS, 2011). Though, government's intention for lifting the ban (reducing smuggling and
generating revenue, NBS, 2011) may be noble, the resulting influx of imported textiles
did more harm to local textile industry. Eneji et al. (2012) regarded the influx as
"detrimental to the survival of Nigeria's textile industry" (p. 133).

It is detrimental because the domination of China's textile in the African market has
almost obliterated the industry and threatened the leadership of Nigeria in the region. In

13
the past, Nigeria had 60% of the textile industry's capacity in the West Africa (Osagie,
2015). At this rate, the industry was poised to exploit economies of scale to produce for
the entire region. Regrettably, from 60% local market share in the past (Ebelo, 2013),
local textiles currently have less than 20% market share with the rest filled by imported
products (Iroegbu-Chikezie, 2014). This is a far cry from the 45% local demand that local
textiles meet in Kenya (ACTIF, 2013). The loss of market to imported textiles in Nigeria,
especially from China is because the imported Chinese textiles cost 25% less than
Nigeria's local textiles (Baden & Barber, 2005).

Few African countries have taken measures to protect and make the textile industry
competitive with imported products in the local markets. Ethiopia has a policy that
regulates the quantity of second-hand clothes that can be imported into the country
(Alderin, 2014); South Africa imposed a 22% duty on imported fabrics to make local
fabrics compete favourably with them (Xiaoyang, 2014). Sadly, Nigerian government has
done little to protect and grow the textile industry and has rather been blamed for its
frequent policy inconsistency resulting in exposing the industry to high imports from
Asia (Iroegbu-Chikezie, 2014). For example, the 20% levy on imported textiles for the
industry's development and competitiveness is not released to the industry (Kwajaffa,
2015, cited in Bello, 2014).

Obsolete technology in textile industry

There is no doubt that textile industry globally is largely labour-intensive (Anderson,

2012; Traub-Merz, 2006; Xiaoyang, 2014), but modern textile industry requires new and
advanced technology to achieve a higher level of productivity and competitiveness
(Anyanwu, 2000). For example, due to modern technology, the Chinese spindle produces
twice as much as African spindle (Bedi, 2014, cited in Becker, 2014). However, most
textile mills in Africa are still using old and obsolete technology (COMESA, 2011; NBS,
2011). "Over 80% of technology employed by the industry in the region is obsolete"
(COMESA, 2009, p. 11). This has an adverse effect on mills' productivity and product
quality (Becker, 2014; USITC, 2009).

In Nigeria, the problem of low level of technology in manufacturing industries is very

profound and hinders productivity of the industries. While productivity in developed
countries is being boosted by technology, innovation and automation, industries in the
country such as textile, cement, etc. cannot acquire modern technology (Anyanwu, 2000).
Anyanwu noted further that many industries "are all producing with machinery that were
procured in 1960's and 1970's, resulting in frequent breakdowns and reduction in capacity
utilisation rates" (p. 129). Also, NBS (2011, p. 7) decried the "widespread application of

14
obsolete technology and machinery especially in sectors like textile" in Nigeria. Over
40% of energy used by this machinery is wasted, making them inefficient (Al-Shakarchi
& Abu-Zei, 2002). This affects the costs of production, variety and quality of products
(USITC, 2009).

The cost and availability of capital is a major consideration in the investment decisions
on new machinery in textile industry (USITC, 2009). In Nigeria, many textile mills
cannot afford the high cost of procuring modern machinery and cannot access credit from
the traditional financial institutions for this purpose (NBS, 2011). This is consistent with
the observation of Baden and Barber (2005) on the prevalent high cost of capital to
upgrade technology in Africa. This has constrained the ability of textile mills to produce
high quality products that can compete favourably in both local and regional markets
(NBS, 2011).

While the governments in leading T&C producing-countries support the industry in

technology upgrading (Adhikari, 2006, cited in Adhikari & Yamamoto, 2007; COMESA,
2011; Xiaoyang, 2014), this support is lacking in most textile-producing countries in
Africa (COMESA, 2011). However, there are few exemptions. South Africa, a leading
science, technological and innovative country in the region (UNCTAD, 2010) has spent
$1 billion on technology upgrading and modernisation to make textile and allied
industries more efficient and competitive internationally (South African Government,
2013). The government of Lesotho established an Innovation Fund that provides financial
resources for "the most industrially- and socially-relevant science, technology and
innovation- (STI) related initiatives" (UNCTAD, 2010, p. 11).

In the absence of government support in technology upgrading, few African countries are
attracting large textile firms with advanced technology from Asia. It is noted that due to
the poor operating conditions in Nigeria (Aminu & Olayinka, 2007; NBS, 2011), the
country has not fared well in this area. Countries such as Mauritius, Lesotho, South
Africa, Ethiopia, Kenya are attracting textile companies from Asia who bring capital,
machinery, production processes and modern technology to their textile industries
(Staritz & Morris, 2013; Traub-Merz, 2006; USITC, 2004; Wangalwa, 2015) and
increase the competitiveness of the industries. The relocation encourages technology
transfer to beneficiary countries (Keane & te Velde, 2015).

Mauritania and Indian governments, in 2012, signed an agreement for technology transfer
to counter competition from low-cost suppliers from Asia and enhance the performance
of Mauritanian textile and garment industry (Fashion2Fashion, 2015). Textile industry in
Mauritius is attracting foreign direct investment (FDI) from various countries and

15
focusing on technology upgrading in the industry (Enterprise Mauritius, 2015). Kenyan
government is creating a favourable environment to attract FDI and new technology in
the industry. It is promoting research and development and upgrading of ginning
technology (USITC, 2004) and it has removed all taxes on textile manufacturing
equipment to reduce the costs of procuring modern equipment (Mutume, 2006).

There is no evidence that Nigerian government is supporting this important industry in

the area of technology upgrading. Eneji et al. (2012) suggested that, to build a modern
country, Nigeria requires indigenous manufacturing driven by science, technology and
innovation. Anyanwu (2000) stated that modern technology can boost the productivity
and competitiveness of manufacturing industry in Nigeria by reducing production costs
and time; facilitating efficient production methods and processes; discovering new ways
of doing things; and engendering innovative designs, lending credence to the copious
research on the relationship between innovative technology and high productivity (Amin
& Hagen, 1998; Kongrerk, 2013; O'Mahony & van Ark, 2003; Xiaoyang, 2014).

Conclusion

Manufacturing and other industries in Nigeria have problems of efficiency, productivity

and competitiveness both in domestic and foreign markets. In particular, the once thriving
and viable textile industry is worse hit by lack of general competitiveness. This paper has
undertaken a review of extant literature on why Nigerian textiles are not competitive in
African market, considering that competitiveness has been described as a regional
phenomenon (Rugman et al., 2011). Nigeria, as a 'big brother' in Africa, ought to be a
leading exporter in the region. However, due to a number of challenges, this is not the
case. In fact, textile export from Nigeria to Africa is negligible. An attempt to make this
paper empirical was thwarted by the absence of textile firms in the 250 strong members
of the Export Group of the Lagos Chamber of Commerce and Industry. The Secretary of
the Group confirmed that there is no single textile firm in the Group. This suggests low
demand for Nigeria's textiles in foreign markets.

It then becomes pertinent to examine the major challenges constraining textile

competitiveness in the regional market. These include: high production costs, cheap
imported textiles and use of obsolete technology. The infrastructure deficit in Nigeria has
forced textile industry to incur additional costs providing the required infrastructure. This,
combined with the high costs of capital in the country, have raised the prices of textiles
and made them uncompetitive. Many textile firms refused to access the N100 billion
CTG revival fund due to the significant adverse effects of infrastructure deficit on their

16
operations. In addition, the presence of cheap imported textiles, especially from China,
has stunted the growth of the industry and driven many firms out of the market.

Finally, continued reliance of the industry on old, obsolete and outdated technology has
also been a bane of inefficiency and un-competitiveness that have undermined the
industry. This is in contrast to the development in few African countries. Textile
industries in South Africa, Mauritius, Lesotho, Ethiopia, Kenya, etc. have upgraded their
technology to modern one. The industry benefits from the government supports. The
governments in these countries are also attracting leading textile firms from Asia, which
bring modern technology to the industry. Therefore, it is concluded that high production
costs, cheap imported textiles and use of obsolete technology are the major barriers to the
lack of competitiveness of Nigeria's textiles in the regional market.

Issues discussed in this paper have a number of policy implications. There is need to
upgrade and expand the country's infrastructure. The proposed $25 billion infrastructure
fund by the Buhari's administration is laudable. If this amount is spent judiciously, it is
expected to impact positively on the productivity, quality, prices and competitiveness of
the industry. The government should enunciate policies to attract leading textile mills
from Asia to the country's free trade areas for export production. This will help upgrade
technology used in the industry and also increase productivity, quality and
competitiveness of the industry. Finally, the government should increase its financial,
commercial and technological supports for the industry.

In particular, government should implement, with patriotism and vigour, the 'Buy
Nigeria' policy, especially among the government ministries, departments and agencies to
expand the market for local brands and increase economies of scale, productivity and
competitiveness of textile industry. Agencies such as the Police, Military, Para-military,
Civil Defense, Lagos State Traffic Management Authority (LASTMA), Kick Against
Indiscipline (KAI), primary and secondary schools and others should, as a matter of
public policy, patronise local textile industry.

17
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