Trade Liberalization and Performance of the Nigerian Textile Industry

Abstract

Nigeria textile industry is characterized by questionable incentives, political uncertainty, acute power shortage, poor infrastructure, smuggling and red-tape bureaucracy, among others. The study modified the endogenous growth model within a time series (1986 and 2015) estimation techniques of Autoregressive Distributed Lagged model (ARDL). Findings revealed that the effect of simple tariff rate on textile industry is negative and statistically significant in the long-run; while trade liberalization policy measure through simple tariff rate has a lag effect before it can be effective in the textile industry. In both short and long run, real effective exchange rate depreciation worsens the performance of the textile industry in Nigeria. In the long run, a 1.0% rise in trade openness would decrease the level of textile industry performance by about 17.49%, while factor affecting textile industry performance in the short run are simple tariff rate, financial development, exchange rate changes, trade openness and labor and capital inputs respectively. The study concluded that Trade liberalization has a lag effect on textile industry performance and a significant effect on the performance of the Nigerian textile industry. It is therefore recommended that government should make concerted efforts toward providing a favorable business environment, reducing inflation and improve the infrastructural facilities for the textile industry to strive.

Appraisal of Factors Influencing Small and Medium Enterprises (SMES) in Textile Sub-sector in Yoruba Land, Southwest Nigeria

“…Okeowo [16] notes that Nigerian textile industry was well-established in the precolonial era when for many years, various textile processes including textile weaving, spinning and dyeing, ginning and carding were done with bare hands. According to Okeowo [16], Nigerian textile industry was ranked the third largest in Africa, next to Egypt and South Africa, as well as the second largest employer of labor in Nigeria, with a total number of about 700,000 workers, operating up to 175 mills, generating a turnover of over US$8.95 billion and contributing about 25 per cent to the nation's manufacturing value added. In a similar study, Bello et al [15] also affirm that the industry offered good support to the economy because the country had adequate raw materials for textile production.…”

“…Okeowo [16] examine the effect of trade liberalization on the performance of textile industry. Results show that trade liberalization has both lag and significant effects on the performance of the Nigerian textile industry from 1986 to 2015.…”

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“…Similarly, Durotoye et al (2018), Ukenna, Makinde, Akinlabi, and Asikhia (2019) also emphasized that strategic entrepreneurship results in superior firm performance in a highly turbulent environment for the sole goal of enhancing the market share of the firm. In Nigeria, scholars (Chukwu, Liman, Enudu, & Ehiaghe, 2015;Murtala, Ramatu, Yusuf, & Gold, 2018;Okeowo, 2017) identified low market share of the textile sector given the record of poor leadership, problem of inputs supply, demand, and price competitiveness of the Nigerian textile sector, lack of supportive infrastructure, smuggling and high cost of production which has sent many textile firms in Nigeria into catalepsy.…”

“…Furthermore, the lack of patronage of Nigerian products due to its high cost affects the market share of the textile sector in Nigeria (Okeowo, 2017). According to the Nigeria Textile Manufacturing Association [NTMA] (2019), the textile market is been dominated by smuggled products and imported fabrics and this has led to a significant reduction in the number of functional manufacturing textile industries in the country which has resulted to the drastic decline in the market share of Nigeria textile sector.…”

“…Similarly, within 1992 to 1995 the estimated number of textile manufacturing firms in Nigeria was 124, from 1996 to 1999, the number declined to 112, from 2000 to 2003, 60 from 2004 to 2007, 45 from 2008 to 2011, Nigeria had 40 textile firms, from 2012 to 2015 Manufacturers Association of Nigeria (MAN, 2018), the firms in the industry further reduced to a total of 25 as at 2019 which are operating below capacity with low performance (NTMA, 2019). The situation also created a significant loss of jobs within the industry has employment fell from 60,000 in 2002, to 24,000 in 2010 and approximately 20,000 in 2016 (Okeowo, 2017).…”