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Business, Economy, Finance

CBN Moves To Halt $4bn Capital Flight In Textile Sector

The Central Bank of Nigeria (CBN) yesterday took bold steps to reverse the $4billion Nigeria spends annually on imported textiles and ready-made clothing by kicking off the distribution of cotton seeds and other inputs to farmers in Katsina State.

CBN governor, Mr. Godwin Emefiele, who flagged-off the distribution of cotton seeds and other inputs to 100,000 farmers in Katsina State for the 2019 farming season under the CBN-Anchor Borrower Programme, said that the gesture was aimed at reviving the country’s moribund cotton, textile and garment sector. He noted that the past 20 years had been very difficult for the cotton, textile and garment sector resulting in 130 firms in the industry being shut down.

To sanitise the system, the apex bank threatened to blacklist individuals, banks and companies involved in illegal textile importation so that the local players can survive and remain in business.

Emefiele said: “Farmers and processors have had to deal with low-quality seeds, rising operating cost and weak sales due to high energy cost of running factories, smuggling of textile goods and poor access to finance. Smuggling of textile goods alone is also estimated to have cost the nation over $2.2billion.’’

According to him, Nigeria was home to African largest textile industry with over 180 textiles mills in operation, which employed close to 250,000 people but “only 25 textile factories are operating today, and the workforce stands at less than 20, 000 people.”

He explained that the CBN resolved to initiate support measures that would drive productivity in the critical sectors of the economy following the over 60 per cent drop in crude oil prices from 2015 to 2017 and its attendant effects on economic growth, inflation and the nation’s external reserves.

The distribution of the cotton seeds to farmers is targeted at improving the commodity’s production from 80,000 tonnes in 2018 to over 300,000 tonnes by 2020 and reviving Nigeria’s cotton, textiles and garments sector.

Emefiele who reiterated that the foreign exchange restriction on finished textiles and other 42 items remained in force noted that the smuggling of textile goods alone was also estimated to cost Nigeria over $2.2 billion annually.

The CBN governor said that the measures taken by the apex bank were yielding results and had helped in driving interest by potential investors who are seeking to make investments to support improved production of textiles in Nigeria.

To curb smuggling, Emefiele said that the CBN was gathering data about and investigating the accounts of individuals and corporate entities involved in smuggling and dumping textile materials in Nigeria with a view to blacklisting them, adding that all banks in Nigeria would be barred from conducting any banking business with such companies, their owners and top management.

He further said that the CBN had identified insufficient cotton seeds as one of the major challenges facing Nigerian farmers, hence the apex bank sought to change the narrative on the cotton and textile industry through the distribution of high yielding cotton seeds to the beneficiaries.

The provision of the seedlings to more than 100,000 farmers cultivating over 200,000 hectares of farmland, along with extensive training on proper farming techniques, Emefiele said would boost the production of high grade cotton lint at much-improved yields of up to four tonnes per hectare, from the current cultivation rate of less than one tonne per hectare. He added that the move would also reduce the amount spent by Nigeria on imported textiles and ready-made clothing estimated at about $4billion annually. Nigeria in the 1970s and early 1980s was home to Africa’s largest textile industry, with over 180 textile mills which employed over 450,000 people, representing about 25 per cent of the workforce in the manufacturing sector.

Emefiele recalled that the industry was supported by the production of cotton by 600,000 local farmers across 30 of the 36 states of the federation, thousands of ginnery workers who processed the cotton from farmers, and a large number of distributors who sold the finished cloths to consumers.

He, however, expressed regrets that the farmers and processors had to deal with low-quality seeds, rising operating cost and weak sales due to high energy cost of running the factories, poor access to finance and smuggling of textile goods, which he estimated cost Nigeria over $2.2 billion annually.

He lamented that only 25 textile factories were currently operating in Nigeria with a workforce of less than 20,000 people, stressing that a large proportion of clothing materials were being imported from China and European countries Emefiele disclosed that no fewer than 130 textile companies had closed shop in the country in recent times due to various constraints.

He told Governor Masari that ‘‘textile industries used to be the largest employers of labour in Nigeria after the public service but due to certain constraints, such as smuggling, dumping, lack of access to finance and issue bordering on power, over 130 textile companies have so far perished. Today, we are complaining about insecurity and kidnapping, the reasons for these are joblessness and hopelessness; so, we need to do something about it.

We must revitalise the textile industry to be the largest employer of labour, we feel that we will set the stage rolling, we must come to Katsina State which is the largest producer of cotton to begin a process.’’ He said that the CBN has held a lot of meetings with the farmers and other people on the value chain on how to achieve the desired success and urged Nigerians to stop smuggling and dumping of cotton and textile materials in order to revive the industry. In his remarks, Masari said that agriculture was the next sector that the state government accorded priority after education.

He said that reviving the textile industry was the biggest and quickest way of solving unemployment in the country and commended the CBN for its efforts in that direction. Masari, however, urged the apex bank to review the procedures for accessing loan facilities by the farmers.

Masari insisted that agricultural revival was akin to breathing life into the people of Katsina State, adding that if the sector was provided with the necessary support, it could employ over 80 per cent of Nigerians.

“The best and quickest way to fight poverty is through agriculture because investment in agriculture will start yielding dividends only after six months and in every planting season and with so many dams around the country, we can produce 12 months in a year,” Masari said. Welcoming the stakeholders, the deputy governor, who doubles as the commissioner for Agriculture, Alhaji Mannir Yakubu, said that about N19 billion had been spent on agriculture by the Masari-led administration in the past three and a half years.

He said: “The funds released for the implementation of the agricultural activities are aimed at boosting agricultural production and the provision of employment to our teeming population particularly the youths. It is in the light of this that the state government has provided facilities, incentives and enabling environment to ensure small-scale farmers in the state are engaged massively all the year round,” he added.

The minister of Agriculture and Rural Development, Chief Audu Ogbeh, said that the reforms initiated by the Emefiele-led CBN had helped Nigeria to escape the economic crisis far worse than the situation in Venezuela today. Ogbeh, who led the apex bank’s chief executive on the courtesy call on Governor Masari, commended the courage of Emefiele in initiating the Anchor Borrowers Programme at one digit interest rate.

He said: “It’s one of the greatest things that has ever happened in this country in the last 40 years and I am in a position to say so because I have been around in the system.

I want to commend you, the CBN governor, for being so tenacious in following this up.” Ogbeh continued: “If this CBN administration had not decided to invest in this method of bypassing the obstacle and mountains standing in the way of agricultural development, by now this country would have been in far worse than the situation in Venezuela because accessing the credit had always been the problem.”

The minister stressed that the revival of the cotton industry remained imperative to stem the collapse of the industry and its implications for the economy in terms of job loss and taxes.


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