Nigeria: Textile Industry Development And Trade Investment Cooperation Potential

1. Country profile

geographical environment

Nigeria is located in the southeast of West Africa, bordering on Cameroon in the East, facing Chad across Lake Chad in the northeast, connecting Beninese in the west, Niger in the north, and the Gulf of Guinea in the Atlantic Ocean in the south. It covers an area of 924000 square kilometers, with a boundary line of about 4035 kilometers and a coastline of 800 kilometers. The terrain is high in the north and low in the south. Nigeria has a tropical monsoon climate. The whole year is divided into dry season and rainy season. The annual average temperature is 26-27 ℃.

natural resources

Nigeria is rich in water resources, but due to backward water treatment technology and lack of water treatment equipment, drinking water supply is in short supply. Poor power supply capacity, unstable power supply and serious power failure is one of the prominent problems in Nigeria. As Africa's largest oil producer, the world's tenth largest oil producer and the seventh largest crude oil exporter, Nigeria has proven natural gas reserves of 5.3 trillion cubic meters, ranking first in Africa and tenth in the world.

infrastructure

The total length of highways in Nigeria is 194400 km, but the situation in the southeast and northwest is poor. The total length of the railway is more than 3800 kilometers, but the transportation capacity is not strong. Nigeria has eight major seaports with advanced port facilities. Lagos port is the busiest and largest maritime port in West Africa. There are 17 airports, including 6 international airports and 11 domestic airports. China has not yet opened direct flights with Nigeria, but can transfer to Nigeria via multiple routes.

population distribution

With a total population of 205 million, Nigeria is the most populous country in Africa, with a labor force of nearly 60 million and a urbanization rate of about 53%. The official language of Nigeria is English, and there are more than 500 tribal languages in Nigeria.

Macro economy

Nigeria is the largest economy in Africa, with a GDP of 429.42 billion US dollars in 2020, an economic growth rate of - 1.8%, and a per capita GDP of about 2083 US dollars. According to the world bank's doing business report 2020, Nigeria ranks 131st among 190 countries and regions. Among the 141 most competitive countries and regions in the world, Nigeria ranks 115th. According to the 2021 global investment report of the United Nations Conference on Trade and development, Nigeria will attract 2.4 billion US dollars of foreign direct investment in 2020, with a year-on-year increase of 3.5%.

2. Current situation of textile industry

Industrial scale

The textile industry played an important role in the early industrial development of Nigeria. In the 1970s and 1980s, its textile industry was among the best in Africa. At that time, there were more than 180 textile factories in the country, and there were about 400000 employees in the textile industry, accounting for 25% of the total number of manufacturing workers in Nigeria. Subsequently, due to the increasingly weak production capacity of cotton planting in the upstream, high production costs of local textile industry, insufficient production equipment for textile production and manufacturing, as well as unstable domestic power supply, low operation efficiency of textile production equipment and high financing cost, the international competitiveness of Nepal's textile industry continued to decline, and most textile mills were shut down, As of 2009, less than 50 textile enterprises were still in operation in Nigeria. At present, the operation of Nigeria's local textile industry is difficult and its development is almost stagnant.

international trade

According to the Statistics Bureau of Nigeria, in 2020, Nigeria's textile and clothing export volume is 16.23 million U.S. dollars. The main export destinations are Pakistan (10.32 million U.S. dollars, accounting for 64%), Bangladesh (2.94 million U.S. dollars, accounting for 18%) and Vietnam, Portugal and other countries. The main export products are uncombed cotton, accounting for 86%. In 2020, the country's textile and clothing import volume is 868 million US dollars. The main import sources are China (430 million US dollars, accounting for 50%), Japan (72 million US dollars, accounting for 8%) and France (53 million US dollars, accounting for 6%). The imported products are mainly chemical fibers, fabrics and other textile products.

The trade deficit of Nigeria's textile industry is very obvious. On the one hand, Nigeria's textile and clothing industry is weak. On the other hand, as Africa's largest population country and the largest economy, Nigeria's textile and clothing consumption demand is very large. The Nigerian government has realized the urgency and importance of developing its own textile and garment industry. In order to revive the development of its textile and garment industry, the government has issued policies to prohibit the import of second-hand clothing since 2010, and began to issue supportive policies for the textile industry and increase support for cotton planting and processing in the upstream. At present, the field of cotton production and processing has achieved phased results. By the end of 2020, the cotton production in Nigeria has increased significantly, and the number of cotton farmers has also increased from 80000 in 2018 to 134000 in 2020. With the support of the Central Bank of Nigeria, the number of ginning plants in Nigeria has also increased from 8 in 2019 to 25 at present. The Nepalese government also plans to use three of the six special economic zones planned for the development of textile and clothing industries. However, in addition to cotton production, the development of downstream textile industry has not achieved obvious results.

3. Trade and investment policy

Foreign trade policy

Nigeria has signed bilateral trade agreements with 16 countries including China, Cuba, Egypt, Ethiopia, Iran, Kenya and Vietnam. The Nigeria US trade and investment framework agreement signed with the United States has also entered into force. In terms of the unilateral preferential trade arrangement, Nigeria enjoys the preferential trade policies given by the Cotonou agreement of the European Union and the African Growth and Opportunity Act (AGOA) of the United States. On the multilateral side, Nigeria is a member of the economic community of West African States (ECOWAS) and the global system of trade preferences for developing countries (GSTP), and is also a party to the free trade agreement of the African continent.

Nigeria adopts tariff escalation to encourage its industrial and agricultural production. Low tariff shall be imposed on the import of basic raw materials and means of production (including production equipment), while high tariff shall be imposed on the import of manufactured products, food, consumer goods and luxury goods. Most textile raw materials such as raw silk, wool, flax, etc. import tariff is 15%, cotton 5%, cotton thread, cotton yarn, etc. import tariff is 30% - 40%, finished products and clothing are more than 55% - 75%. Second hand clothing has been banned by the Nepalese government since 2010.

Preferential policies for investment

Nigeria has signed bilateral investment agreements with 15 countries and regions including China, Finland, Spain, Italy, Germany, Romania and South Korea and has entered into force. According to the relevant provisions of the Nigerian Investment Promotion Commission Act, Nigeria implements a unified preferential policy for foreign investment without double standards. For 69 subdivided industries / products including manufacturing industry, pioneer status can be granted. Enterprises investing in pioneer industries can enjoy 5-year tax-free period and 7-year tax-free period in economically backward areas. The production of cotton yarn and man-made fiber is one of the pioneer industries mentioned above. In addition, Nigeria's preferential investment policies include:

(1) labor intensive enterprises can get tax exemption and exemption. For example, enterprises employing 1000 people or more can enjoy 15% tax preference; Enterprises employing 200 or more people can enjoy 7% tax preference; Enterprises employing 100 or more people can enjoy a 6% tax discount.

(2) manufacturing enterprises in the bonded area shall enjoy duty-free import of raw materials and intermediate products for re export production;

(3) enterprises who import raw materials for production and then export will enjoy a 60% tax rebate;

(4) export enterprises earning foreign exchange can enjoy export subsidies with relevant certificates;

(5) the government has set up export development fund to provide initial cost support for private export enterprises;

(6) enterprises in the economic cooperation zone can enjoy multiple preferential policies, such as exemption from taxes and fees of governments at all levels, tariff on imported raw materials, value-added tax, etc; Foreign invested capital stock can be withdrawn at any time; Visa quota is not limited; The products can be freely sold all over the country and 24-hour power supply; One stop service; No strike and other preferential policies are allowed in the park.

At present, there are 20 free trade zones and export processing zones under operation in Nigeria, which are under the unified management of Nigeria export processing zone administration. They are mainly distributed in the federal capital area and seven states, including Lagos, Kano and ogong, of which Lagos is the largest, reaching 11. As of May 2019, more than 400 enterprises have entered the park, attracting more than 20 billion US dollars of foreign direct investment. The main purpose of setting up free trade zone and export processing zone is to promote economic diversification and industrialization, stimulate the development of export-oriented enterprises and manufacturing industry, and reduce the dependence of economy on oil and natural gas resources. If more than 75% of the products of manufacturing enterprises operating in the above parks are exported, they can obtain the license of export processing enterprises and enjoy the relevant preferential policies. At the same time, enterprises can also invest, develop, operate and manage comprehensive free trade zones and export processing zones in Nigeria.

exchange control

Since 2015, Nigeria has adopted strict foreign exchange control measures, and there are many restrictions on the free remittance of foreign exchange, which has a great impact on the normal operation and development of foreign-funded enterprises. At present, Nigeria has banned the import and purchase of foreign exchange for 41 categories of products, such as rice, furniture and textiles. Importers are not allowed to obtain the foreign exchange needed for importing these products from the Nigerian foreign exchange market.

4. Textile industry cooperation between China and Nigeria

China and Nigeria established diplomatic relations in 1971, and the two heads of state reached a consensus on establishing a strategic partnership between the two countries in 2005. At present, Nigeria is China's largest contract market, largest export market, second largest trading partner and major investment destination in Africa. The textile industry investment cooperation between China and Nepal is still in its infancy. Statistics from the Ministry of Commerce since 2013 show that China's investment in Nigeria's textile industry is less than 10 million US dollars. In the field of bilateral trade cooperation, Nigeria has always been the most important partner of China's textile and clothing trade with Africa.

According to the statistics of China's customs, in 2020, the total trade volume of textiles and clothing between China and Nigeria is 4.07 billion US dollars, accounting for 20% of the total trade volume of China and Africa, ranking first. Among them, the export volume of China's textile and clothing is 4.06 billion US dollars, mainly woven clothing and accessories (1.04 billion US dollars, accounting for 26%), chemical fiber filament and fabric (950 million US dollars, accounting for 23%), cotton, cotton yarn and cotton woven fabric (810 million dollars, accounting for 20%). In 2020, China will import 7.44 million U.S. dollars of textile and clothing from Nigeria. The main imported products are chemical fiber staple fiber and fabrics (6.41 million US dollars, accounting for 86%).

5. Summary and suggestions

In terms of trade, Nigeria is one of China's most important textile and clothing consumer markets in Africa. The trade cooperation between China and Nepal in the field of textiles and clothing has a good foundation and has the potential to continue to expand development.

(1) as Africa's largest economy and largest population country, Nigeria's economic development is relatively stable, with a large proportion of young population, and the domestic textile and clothing market has obvious consumption development potential, which is conducive to domestic textile and garment enterprises to expand the scale of trade cooperation and brand enterprises to establish domestic brand influence in Nigeria according to the specific market demand.

(2) Nigeria's unique geographical advantages can link most countries in West Africa, Central Africa and North Africa, and its textile and clothing trade transit station is obvious. With the help of trade docking platforms such as the Nigeria international textile and garment Expo hosted by domestic industry associations in Lagos, domestic textile and garment enterprises can not only deeply tap the potential domestic textile and clothing demand of Nigeria, but also radiate the emerging markets in the Midwest and even the whole Africa.

In terms of investment, it is possible for Nigeria to carry out investment and cooperation in textile industry, but the realistic challenges are great.

(1) Nigeria has a high degree of opening up as a whole, and has a good foundation for investment and cooperation with Chinese enterprises. In recent years, the government began to encourage and support the development of textile industry from the upstream of textile industry chain, and welcomed the investment in textile industry.

(2) Nigeria has sufficient labor force and relatively low salary level, and enjoys preferential tariff for European and American textile and clothing exports, as well as a huge domestic clothing consumption market and radiating markets of neighboring countries, which are potential favorable conditions for textile enterprises to carry out investment and cooperation in Nigeria.

(3) continuous ethnic conflicts, high security risks and frequent terrorist attacks are the primary factors affecting domestic enterprises to invest in the textile industry in Nepal.

(4) backward infrastructure, tight water and electricity supply and strict foreign exchange control are also challenges for enterprises to invest in Nigeria.

(source: China Council for the promotion of textile trade)