Nigeria’s apex bank has approved a loan of N19.18 billion to nine cotton-producing companies. The funds are to be deployed in the retooling of their factories in line with the broader objective of reviving the cotton and textile sector.
In addition to upgrading their facilities, the single-digit interest rate loan will help to sustain operations and improve production capacity, the Central Bank Governor, Godwin Emefiele said while signing two memoranda of understanding in Abuja.
“We are improving the linkage between cotton farmers and ginneries, by ensuring that ginneries are able to off-take the high-quality cotton produced by these farmers,” Emefiele said, adding that the same support would be extended to textile and garment firms.
In order to guarantee steady extraction and processing of cotton lint and cotton seeds, one of the MoU was between the National Cotton Association of Nigeria and Ginning Companies.
The other agreement is meant to facilitate a contract of five years or more with textile and garment companies to manufacture uniforms for use by various arms of Nigeria’s uniform services.
It was signed between the Nigerian Textile Manufacturers Association and the Armed Forces of Nigeria, the Nigerian Police, paramilitary institutions and the National Youth Service Corps.
Emefiele added that the latest agreements were in line with the current administration’s plan to get all Federal Government Ministries, Departments, and Agencies to give preference to local content in their procurement of goods and services.
The intervention by the Central Bank of Nigeria (CBN) is also meant to revive the cotton and textile sector while diversifying Nigeria’s economy away from the dependence on crude oil. The once-booming sector represents an economically viable option for the diversification drive based on the country’s potential.
Nigeria was regarded as Africa’s largest textile industry in the 1980s and 1990s. At the time, Africa’s biggest economy had over 180 textile mills in operation, employing close to over 450,000 people, and contributing over 25 percent of the workforce in the manufacturing sector.
The sector has deteriorated over time, however, as most of the textile factories have stopped operations – only 25 are operational presently. But according to the CBN governor, the industry has the potential to create at least two million jobs if well harnessed.
In June, loans of up to N7 billion were provided to cotton farmers by the CBN and according to Emefiele, effectively reviving the cotton sector would cost Nigeria a total of N100 billion.
The bank also plans to improve local cotton production in the country from about 80,000 tonnes in 2018 to over 300,000 tonnes by 2020, Emefiele said in May during the distribution of cotton seeds and other inputs to farmers in Katsina State. Over 100,000 farmers reportedly collected the seeds at the national flag-off event for the 2019 planting season.
While creating jobs and employment opportunities, reviving the cotton and textile industry also holds potential for boosting government revenue via exports as well as positioning the Nigerian economy to maximize opportunities that come with the continental free trade deal under which trading will commence fully next July.
Apart from disbursing loans, the apex bank also has a special committee in place – the Textile Revival Implementation Committee – to ensure a successful revival initiative. The team comprises the CBN, Federal Ministries of Agriculture and Rural Development; Water Resources; Industry, Trade and Investment, and the governments of Kano, Kaduna, Katsina, Gombe, and Zamfara state.