Textile Industry FX Ban: Flogging a Dead Horse?

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According to the latest report by the National Bureau of Statistics (NBS), the textile industry accounted for c. 1.3% of Nigeria’s total import in 2018. Also, on a net basis, textile import grew by 21.2%y/y to N165.0bn in 2018, prompting the Central Bank of Nigeria (CBN) to add textile and other clothing materials to its existing list of 42-items ineligible to access foreign exchange, with an immediate effect.

Meanwhile, the Apex bank promised to provide financial support to local textile manufacturers at single digit interest rates. This according to the CBN would help reposition the textile, cotton & garment industry for job creation and the development of the economy.

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In our view, while the move to provide financial intervention for the sector player is positive on a few fronts, the policy runs the risk of fading into futility, just like the N100.0bn Cotton, Textile and Garment Revival Fund introduced by FG in 2010, if the fundamental challenge of poor infrastructure, mainly power, is not fixed. Also, we believe the ban will lead to increased smuggling of textile products, especially if FX rates at the parallel market continue to remain attractive. Overall, we opine that more efforts should be channelled to making the sector bankable.

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