Nigerian textile importers may be unable to pay bills because of foreign exchange ban
Textile and garment enterprises that export products to Nigeria should note that the Central Bank of Nigeria has banned foreign-exchange settlement of imported textile products, forbidding all textile and garment materials importers to apply for foreign-exchange settlement and purchases. The ban has already taken effect.
Nearly 60 percent of Nigeria's imported textile products are made in China
It is reported that the policy is aimed at rejuvenating Nigeria's textile, cotton and garment industries, and then increasing the country's job opportunities to solve its social and economic issues.
According to the ban, domestic banks involved in foreign exchange trading as well as foreign exchange traders are not allowed to offer foreign-exchange settlement and purchase services to textile importers. And the government strictly prohibits textile smuggling from surrounding countries such as Senegal, Ghana and Zambia. The Central Bank of Nigeria will supplement the policy by providing low-interest credit loans to help the country's textile industry upgrade equipment and produce high-quality textile products and garments.
Nigeria's textile industry ranked third in Africa in the 1970s and 1980s. However, textile products of Asia, particularly China and India, later had a huge impact on Nigeria's textile industry. 2017 statistics show that Nigeria's imported textile products reached $497 million that year, of which 59.36 percent came from China. Therefore, the Central Bank of Nigeria stops providing foreign exchange for domestic importers, in order to better develop the country's textile industry, control foreign exchange disbursements, and stabilize interest rates.
Nigeria is a country likes to control foreign exchange. It has always been difficult for its importers to buy US dollars. According to Chinese export companies, some of their Nigerian clients often delay payment because they cannot buy US dollars, or they think that the dealer's commission charge is too high. On the other hand, the Nigerian government has cracked down on black market currency swaps, illegal private bank currency swaps, and foreign exchange smuggling. If Nigerian importers get foreign currency via these illegal channels, the risks are high and it is difficult to succeed.
Nigeria's textile industry warns the government about the new policy
After the issuance of the ban, the Lagos Chamber of Commerce and Industries (LCCI) warned the government and suggested that it should reconsider whether to impose foreign exchange controls on the import of textile products, because Nigeria plays a leading role in Africa's fashion industry and locally-made textile products cannot satisfy the domestic textile industry's demand for product quality and quantity.
Muda Yusuf, secretary-general of LCCI, said that this suggestion does not mean underestimating the importance of the country's textile enterprises and ignoring the importance of its industrialization, but emphasizes the importance of strategic measures in realizing industrialization. He also said that if the country's power issue and weak infrastructure cannot be solved, it will be impossible for the country to achieve rapid industrialization.
LCCI thinks that due to Nigeria's leading role in Africa's fashion industry, the development of its garment industry should not be affected by the textile industry, and the government should enhance the production capacity and competitiveness of local companies, which could reduce the country's dependence on imports. The textile industry is energy-intensive and it is difficult for it to develop rapidly under the country's current power supply conditions. And the ban will cause great harm to the country's fashion, fashion accessories, and garment making industries.
It is known that the fashion industry is Nigeria's fastest-growing. Its industrial output has reached about 5 trillion naira and it offers about 500,000 jobs.
Beware of delayed payment of Nigerian importers
It is unknown whether the Nigerian government will accept the suggestion or not. But it is certain that Nigerian importers have to figure out a way to solve the payment issue if they want to import textile products after the new policy takes effect. Although the policy does not directly forbid importing of textile products, it imposes control on the importers' wallets, which will greatly impact textile imports.
The implementation of the ban will have a certain impact on China's textile exports to Nigeria. Therefore, Chinese exporters should ensure that Nigerian importers do not use the new policy as an excuse to delay payment, or jettison the cargo because they cannot buy foreign exchange.
To be more specific, the first step is to be more conscious of risk prevention and control. Chinese exporters should pay close attention to Nigeria's policy changes and trade environment changes, and know the list of products and services that are included in the ban. The second is to buy export credit insurance to prevent and avoid risks and reduce losses. The third is to tap into emerging markets, encouraging enterprises to carry out a diversified market strategy and guiding them to participate in overseas exhibitions and develop e-commerce businesses to find new clients, new markets, and new marketing channels.