Of Textile, Reform, and Globalization

by Moses Ebe Ochonu

In perhaps the most significant economic development since Mr. Obasanjo's administration took office, the Federal Government recently inaugurated a committee to source for N50 billion to disburse to textile firms as soft loans. The money is to be used to revive the comatose textile sector which, before its virtual collapse, was the second largest employer of labor after the civil service.

This development is belated, and it falls short of what the textile industry needs to get back in business. Yet it should be welcomed as a small signal that perhaps the administration is beginning to throw off the yoke of an imposed neo-liberal dogma, which thrives on the blanket disapproval of any form of government interference in business. The extent to which this tiny shift represents a reexamination of the government's neo-liberal economic reform project is unclear. Nor do we know the depth of such a change of direction, or whether it will be sustained and extended to other ailing industries in a manufacturing sector that has been on life support since the late 1990s.

One does not have to exaggerate the government's commitment to the neo-liberal agenda of the Breton Woods Institutions (BWIs) to stress the significance of this new effort to resurrect the textile sector, or to demonstrate that it marks at worst an unconscious departure from the dogmatic application of the doctrine of unregulated economic liberalization. To be sure, this government has not been wholly faithful to the economic reform content of the so-called Washington Consensus, which stresses, among other recommendations, that government should get out of the way of business and allow market forces to drive the economy and promote competition and innovation. The role of government should be, according to the Consensus, the provision of a pro-business environment and an investment-supporting infrastructure.

Contrary to this stated tenet, Mr. Obasanjo's economic team has committed itself to the creation of an economic oligarchy in the form of Transcorp. Mr. Obasanjo, the embodiment of the government's authority, is credited with founding the corporation. Government has also interfered on behalf of the corporate behemoth, cushioning its path with a steady stream of corporate welfare and rigged decisions. The result has been the undermining of competition and the skewing of the investment and government divestment process in favor of Transcorp and other corporate friends of power.

The government has therefore not been exactly a paragon of neo-liberal conformity, at least not by the puritanical standards of the BWIs. But all this is of little consequence in the context of the government's textile industry initiative. What counts is that the government seems to be moving away, however slowly, from the thinking that government should not intervene to assist or protect ailing industries. This is a local manifestation of the puritanical neoclassical economic belief that government should not intervene to protect or subsidize industry under any circumstance. Perhaps the crafters and superintendents of the Government's economic reform agenda - Dr. Okonjo-Iweala and her group - have been stung by reasoned criticisms of the current economic direction or have engaged in a realistic self-appraisal.

Whatever it is, the coincidence and temporal intersection of this initiative with the recent collapse of the Doha Round of trade talks is an interesting convergence. The Doha Round of talks was initiated in 2001 to promote trade liberalization, cut agricultural and industrial subsidies offered by Western and some Asian governments, and to reduce or eliminate protective tariffs imposed hypocritically by developed countries on imports of agricultural and industrial goods into their countries. Neither the World Trade Organization nor the General Agreement on Tariffs and Trade (GATT) has been able to include agricultural exports in its list of items to be excluded from tariffs and subsidies.  So hurtful to Africa 's agricultural export trade are these tariffs and subsidies that many observers believe that their removal, more than the occasional gestures of aid and debt relief (with their economically stifling and imprisoning conditionality), represents the best hope for Africa 's economic renaissance.

As with the collapse of the first round of the Doha talks, Western farmers who are heavily subsidized and protected by a firewall of tariffs have applauded the failure of this round of talks while African producers of exportable agricultural produce and their sympathizers are sulking yet again.

This development bears very important lessons and implications for Mr. Obasanjo's economic team and their "reform." If the principal purveyors of the notion of trade liberalization, free trade, and free markets, are unabashedly committed to protecting the interest of their agricultural and industrial constituents and are wary of sacrificing them on the altar of neo-liberal economics, there is no reason why we should not devise sector-specific, limited subsidies and import tariffs to protect our own producers and keep hard working Nigerians on their jobs. To not do so is to pretend not to notice the hypocritical and self-interested duplicity of the West in these matters, and to put theoretical economic correctness ahead of the economic interest of the country. Economic theory was created by man to serve man's interest, not the other way round.

I have both an indirect experiential connection to the textile industry (having come of age around the Kakuri industrial area of Kaduna , the largest textile manufacturing hub in West Africa ) and an intimate appreciation of its role in the economy as a large employer of labor. I also recognize that the problem in the industry has a potential to compound the economic challenges of this administration, and to make nonsense of the economic gains purportedly brought on by "reforms." The collapse of the many textile firms in Kaduna in the last six years threw thousands of Nigerians out of work, swelling the population of the unemployed and increasing the social volatility of an already tense Kaduna metropolis. Many of the former textile workers gave the best years of their lives to their former employers only to be retrenched without benefits. The ripple effect has been felt by dependent family members and by relations whose resources have been strained to their limits. Needless to say, the problem has added to the national problem of unemployment and economic stagnation. These former workers were consumers of products; owned saving accounts; engaged in value-adding activities in the informal sector; contributed to the creation of educated future citizens - their children; and spared the government of the political problems that have accompanied the collapse of Nigeria 's manufacturing sector.

This is why, as cautious as I am about the government's decision to help revive the textile industry, I would love to believe that it represents a new movement towards macroeconomic pragmatism. There are grounds, however, to concede to skeptics that this may be yet another isolated moment of accidental presidential wisdom, which may not influence or reflect on a rigidly doctrinaire "reform" agenda. What's more, if the minister of finance, Mrs. Nenadi Usman, is to be believed, this may be yet another ad-hoc product of presidential fiat, lacking a policy context and ideological significance. The minister of finance, Mrs. Nenadi Usman, who announced the constitution of the Presidential Panel on the Revival of the Textile Industry stated that "Obasanjo believes the problem of the textile industry are linked to obsolete equipment unable to produce competitive products."

This statement, if true, displays a fundamental misunderstanding of the root of the problem in the Nigerian textile industry, which would indicate that much of the government's economic thinking is founded on at best problematic reading of the global economic climate.

True, the textile industry is operating with relatively obsolete machinery. But Nigeria is in the Third World ! It is escapist to expect that the textile industry would be inured to the familiar feature of other third world industries - obsolete equipment. It must be said that Nigerian industries have always utilized equipment that, when compared to those used in similar industrial processes in the West and in parts of Asia , is substandard. But this corpus of outmoded equipments and industrial processes sustained Nigerian manufacturing though many decades and still do the few industries that are in operation today.

 The main problem of the textile industry is a fancy familiar word called globalization, and its key identifying feature, trade liberalization. The Nigerian textile industry has simply caved in under the impact of the indiscriminate importation of cheap foreign textiles as well as the smuggling of contraband textile materials into the country. Unfortunately, under a government that has outsourced its economic decision-making to the Bretton Woods institutions (with their operative mantra of "absolutely no subsidies" and "trade liberalization" which, by the way, are only enforced on African and other third world countries), the textile sector has been undermined by the products of overseas textile companies whose host governments are not afraid to subsidize their raw materials or grant them concessions and targeted tariff protection.

Our textile industry, and the entire manufacturing sector, is a major casualty of the absence of autonomy in the economic thinking sphere, as well as a lack of the courage necessary to stand up to the hypocritical and damaging impositions of the Bretton Woods Institutions and the International Finance Institutions (IFIs).

It is this entrenched mindset of economic surrender, this obsequious devotion to formulaic and imperfect economic doctrines that has also inspired drastic cuts to social service expenditures, especially the health and education sectors. These derelictions of governmental social responsibility, among other sets of imposed conditionalities, have been cleverly advertised as reform.

 We should invest in our own people - in the "production" and maintenance of a healthy, productive, and educated population. Without a human capital base, no amount of economic reform is sustainable, as only a happy and healthy population can engage in the economic activities necessary to anchor the gains of reform and economic growth. Similarly, only an educated populace can take advantage of globalization, as the Indians who have been investing heavily in education, are now doing through the outsourcing boom.

The crevices of the international economic system are not too tight for self-interested maneuvers. The Indians and the Malaysians have self-interestedly scorned some of the damaging prescriptions of the Bretton Woods Institutions while implementing aspects of their reform package that are politically and economically safe, and suited to their peculiar economic challenges. Nigeria should do the same. The heavens will not fall if we show a little economic independence in managing our uniquely configured economy in occasional disregard of a tenuous and problematic Euro-American economic consensus.

Let the government take its concern for the textile sector to the next logical level. Half measures are unacceptable. Let it vigorously enforce the ban on contraband textile importation, and let it grant more concessions and waivers to the Nigerian textile industry. And let it retaliate against harmful Western tariffs and subsidies by imposing tariffs against government-subsidized cheap textiles from the West, China , and other Asian countries. The social cost of unegulated and unreciprocated trade liberalization is too high for the Nigerian polity to absorb.

Re: .Of Textile, Reform, and Globalization
Vser posted on 07-28-2006, 12:48:40 PM
Economy and culture.


Last time I checked, Nigeria has banned a lot of imported printed fabrics since 2002. Also, I still think Achife's ideas and Obugi ideas are partly correct, why so is because I used Nigerian economics numbers and I came up with the central thesis of John perkins. IN my opinion, the Nigerian economy innadvertly created the schism and wide gap between the rich and the poor........ as some will say evil begets evil, and good begets good. and also the situation whereby the economy serves a web of clique connected by friendship, feudal lordship, nepotism and so on was a result of government policy in a centralized economy.
Which also brings me to this write up and respect. Do you respect the intelligence of readers to provide them with factual numbers and why you reached your conclusions? (printed fabrics where banned in 2002)

The problem also is with the word Neo-liberal it is an economic term used internationally, maybe if Nigeria stops talking about international terms and use local terms then it will garner some respect from some of us. Why it matter is because personally I believe in fiscal federalism, in America government revenue is from taxes here it is from Oil. So why not give back half of the oil money to the oil communities, it opens up the west, the east, middle belt and north to look for other avenues to raise money and it will diversify the economy.

Thoughts on your Essay. Thumbs up(only because it strives to be more African)
On your write up there is nothing new, many of us have written about the need for government investment in infrastructure and job creation mostly as a result of oil savings.
However, as keynes said in the long run we are all dead. The need for policy sustenance is critical. I will give you an example, during OBJ's first time in governance, he gave an agency headed by my dad millions. My dad wanted to save the money at that time interest rate was 15%, but others hated it, he then was advised to put the money with a government agency NUC. But after the new government came in, their supporters won powerful positions and kicked my dad out and chopped the money. Today OBJ is going, whether you put money in there( I support it, also think it is a money pit) or not my point like obugi it depends on the mindset, the character of the people. Latin America hated the neo liberal idea and has the got the brunt of 'neo liberal' ideas more than Africans(nigeria 2 years minus OBJ), they produced Lula, Chavez and co as a result but guess what a lot of them are better economically than Nigeria, Egypt has a leader who has been on the throne for years and they are still better than Nigeria. In my opinion, It rest with numbers, what works, it rest in my opinion with culture (diversify and create a real federalism in a multicultural society?) and importantly like the example I used it rest with individuals(which is partly Achife's central thesis) . If the individuals are productive, innovative whether socialist or free market (if those idea are contigent with cultural norms) they will do better than what Nigeria was doing.

Why Achife's thesis may work is the focus on individuals and the private sector. I think the potential reality of Nigerian being a multicutural society may work against some economic terms or policy. I.e Niger delta: resource control and government investment, west?: mix economy, east: mix economy, promotion of trade(easterners are major traders), north? it is much harder to say that something will work or something is the solution if in reality it has no long term benefit for some people. I stil believe federalism is the answer. However, like I said basing the economy on underlying norms is a start. But be wary, the mind is progressive, people will move towards a sexy term, product or name than one that is not. Sepracor sounds mor esexy than agructure industries, If the textiles are not innovative, natural law dictates people will move towards innovative things. what do the people like, progressive or new designs and produce what they like if that is done the textiles should be fine if they inadvertly disrespect the customers, they will burn.
Re: .Of Textile, Reform, and Globalization
Tola Odejayi posted on 08-05-2006, 14:56:19 PM
The way I see it, there are four options to redress the unfair trade situation that Ebe has pointed out:

1. The government should subsidise our manufacturers.

Pros: They'll be able to produce more cheaply and therefore compete with goods from abroad.

Cons: The Nigerian government doesn't have as deep pockets as the Western governments who are subsidising the manufacture of the imported goods. Also, subsidies aren't sustainable and can lead to manufacturers becoming addicted to subsidies, pretty much like what you have in the West already.

2. The government should impose tariffs on imported subsidised goods.

Pros: Imported goods will now be more expensive, and thus local producers will be able to compete. Also it raises useful revenue for the government.

Cons: Local producers have less of an incentive to innovate and find ways of producing their goods cheaply since the prices of their competitors' goods are high. Also, there's the problem of enforcing the tariff - more likely than not, some customs officer is going to become very rich.

3. All nations should sit down and work out a multilateral trade agreement that leads to truly free and fair trade (i.e. with as few subsidies and tariffs as possible).

Pros: Freer and fairer trade will lead to a growth of production, leading to an increase in employment and wealth.

Cons: None that I can think of, but the political will needed to get such an agreement worked out is enormous.

4. Producers should shift their attention to goods where they don't have to compete with subsidised imports.

Pros: They don't have to compete at a disadvantage; they maintain their independence from government; and also, they let Western government continue to waste money in subsidies.

Cons: It will be painful for producers who have to shift away (factory closures, etc.) but they are probably already having a hard time of it as it is.
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