CHAPTER ONE
INTRODUCTION
1.2 Background to the Study
Over the last five decades since independence, Nigeria struggled to promote
industrial development. The efforts have generally yielded very modest success and
the reality is that in the early 21st century Nigeria continues to face crisis of
“Industrial development”. The Nigerian National Bureau of Statistics (NNBS; 2011)
asserts that in the 1960s and 1970s Nigerian manufacturing sector developed
positively as a result of Foreign Direct Investment (FDI).
Manufacturing sector of any economy plays a critical function in the
developmental process. The sector remains a source of high wage and low wage jobs
for all types of workers. It previously accounted for majority of Nigeria foreign trade
earnings and it remains essential if Nigeria is to make future major reduction in its
trade deficits. However, studies from National Association of Chambers of
Commerce, Industry, Mines and Agriculture (NACCIMA) (2011) classified over 50
percent of manufacturing companies as “ailing industries”. The industries include:
textiles, iron ore, plastic, aluminum, food processing, cement, automobile, etc. Yet,
the government‟s effort at reviving the ailing manufacturing concern has not yielded
the required result.
In Nigerian manufacturing history, textile industry occupies a unique position
because of its capacity to generate employment (Okere, 2009). Though, traditional
textile have been produced in Nigeria for many years, but modern textile production
commenced in Nigeria in 1956 and 1962 with the establishment of Kaduna Textile
Mill and United Nigerian Textile Mill Limited. The industry produced varied fabrics
annually, ranging from African prints, shirting‟s, embroideries, etc, to Guinea
brocade, Wax prints, Jute and other products (Eneji, Onyinye, Kennedy and Li wrong;
2012). The Central Bank of Nigeria (CBN) Annual Report (2006) revealed that out of
13 sub-sectors in the manufacturing productions, textile and synthetic fabrics account
for a significant proportion of the overall growth in manufacturing production.
Nigerian consumers gave the sector a high priority not for basic clothing but for wide
range of ceremonial purposes, festivities cultural events or for personal wealth and
social status in the peasant economy which is also reflected in the quantity and quality
of cloth use, store and occasionally displayed by people. There are different types of
cloth making among various dominant ethnic groups in Nigeria. The Yoruba are
famous for Aso-oke traditional fabric weaving, the Hausas are known for Kura cloth
making which is deep blue-black and shining design and the Igbos widely known for
Akwete cloth weaving which is basically done by women.
Prior to the down surge in 1990s, Manufacturers Association of Nigeria
(MAN; 2010) asserts that in the 80s the industry provided employment to 450,000
Nigerians with well over 650 functional factories and small scale production units
scattered all over the country. Another group of 160,000 Nigerians were indirectly
employed by the industry. This group includes the producers of raw materials for the
textile industries who are generally referred to as cotton farmers. The industry raised
millions of middlemen, marketers of finished products, tailors, garment makers,
wholesalers, retailers and traditional producers of local fabric.
The textile industry passed through various phases of growth. Import
substitution policies induced steady growth in the 1960s which gave way to rapid
growth averaging 12.5% in the 1970s when the economy was booming. The recession
of early 1980s took its toll: the cumulative production index declined from 427.1 in
1982 to 171.1 in 1984 (Abubakar, 2011). The industry recovered in the late 1980s
achieving an annual growth rate of about 67% between 1985 and 1991 with synthetic
textile alone accounting for about 80% of recorded growth. Due to backward
integration programme instituted by many firms in the industry following the strict
government directive on the issue in the mid 1980s, the level of domestic sourcing of
raw materials was put at about 64% in 1991, a steady improvement from 52% in 1987
and 57% in 1988 (Agbonifoh, 1999). The industry is mainly controlled by large
private sector firms, often with substantial foreign participation.
The major foreign investors within the industry are from Hong Kong, China,
India, United Kingdom, United State of America, Japan and Netherlands. These are
private capital investments for profits except for China where most of the firms are
state and provincial enterprises. As at 1987, 37 textile firms in Nigeria were operating
716,000 spindles and 17541 looms (Gherzi, 2012). However, the output of the sector
has never exceeded 75% of annual domestic consumption, allowing for a thriving
trade in imported textile products. Technological gaps in the industry show that 12
mills representing 61% of the total capacity spin only cotton. However, nearly 30% of
existing mills are integrated mills (Eneji, Oyinye, Kennedy and Rong; 2012).
Textile industry remains a very significant source of employment and is the
most labour intensive sector of the manufacturing industries. The development of
textile industry in Nigeria gained momentum due to availability of indigenous cotton
or raw material, existence of cheap labour and ever growing domestic market.
Over the last few years, several economic factors such as globalization and
trade liberation have created new production and transportation opportunities. Thus,
major trends shaping the domestic manufacturing sector includes: technological
advances, improved production methods and global surplus of manufacturing capacity
especially from China. Today, the Nigerian textile industry is on the brink of
extinction. Between 1992 and 2006, 543,000 textile workers have lost their job (Olori,
2012). More than 150 textile companies have closed down in the past 20 years
(Okere, 2009). The decline in textile production is also evident in the cottage industry,
as only the southwest and northern Nigeria region have local textile producers.
1.3 Statement of the Problem
Nigerian textile industry has become less competitive in the global market place as
competition increases; the process of carrying out business strategy is being
challenged. This pressure includes swift development in modern textile machines, the
cost of acquiring and implementing the technology, employees training to go along
with what is obtained, and preference among Nigerians for foreign textile fabric,
especially when considered in the light of its effect on made in Nigeria wax. Thus, the
decline of the sector was more pronounced as the conventional handloom faced severe
competition from power loom. Many textile factories close shops in northern Nigeria,
out of 37 textile manufacturing firms in the region only four are presently functioning.
However, extant literature on the determinants of textile manufacturing firms in
northern Nigeria is to the best of our knowledge very rare. For example, Obawepe and
Fadeyiro (2012) simply examine trend of demised industries in Kwara state, Gatawa,
Aliyu and Musa (2013) focused on impact of globalization on textile industries and
Essein (2014) concentrates on the constraints of medium scale textile manufacturing
industry in eastern Nigeria.
Apparently, existing literature has not shifted research focus towards failure of
textile companies in northern Nigeria. Consequently, a wide gap in empirical
knowledge is left unattended to for over a decade when the industry continues to
decline. In view of this, the study intends to investigate the determinants of textile
manufacturing companies decline, using product quality, foreign textile fabric and
obsolete technology.
1.3 Research Questions
Consequent upon statement of the problem, the following research questions
become necessary:
- To what extent does quality of „made in Nigeria‟ textile fabric affects the
decline of textile manufacturing firms in northern Nigeria? - What is the impact of foreign textile fabric upon the decline of textile
manufacturing firms in northern Nigeria? - To what extent does obsolete technology affect the decline of textile
manufacturing firms in northern Nigeria?