Nigeria Risks Liquidating Industrial Base It Wants To Revive

By Johnson Emmanuel

Nigeria’s textile revival agenda is confronting a contradiction: while government moves to rebuild the cotton, textile and garment industry, distressed textile factories are still facing liquidation and piecemeal asset sales.

Dr Bello Salman, a prominent member of the Cotton, Textile and Garment Development Forum (CTGDF) is urging the federal government, the Bank of Industry (BOI) and other public financial institutions to pause such disposals and test whether distressed factories can be recovered before their productive assets are dismantled.

DEVELOPMENT:

In a statement titled ‘Recover the Loans But Save the Factories,’ Salman argued that recovering non-performing loans should not automatically mean destroying the industrial infrastructure pledged as collateral.

“A factory does not close alone,” he said, noting that the failure of a ginnery affects cotton farmers, transporters, seasonal workers and downstream textile manufacturers.

“When a spinning or weaving mill is dismantled, the damage travels further: skills disappear, communities weaken, imports rise, and an industrial ecosystem that took decades to build is reduced to land, scrap, and unpaid debt,” he said.

Salman acknowledged that development finance institutions must recover taxpayers’ money and protect their balance sheets, but challenged them to distinguish debt recovery from industrial asset destruction.

DATA:

The immediate financial metric in a distressed factory is usually the outstanding loan and recoverable collateral. Salman argues that this captures only part of the asset’s economic value.

“Its value includes productive land, buildings, power installations, machinery, laboratories, warehouses, technical knowledge, trained workers, and supplier relationships,” he said.

He pointed to the National Economic Council’s approval of a Presidency-domiciled Cotton, Textile and Garment Development Board, to be funded through the textile import levy, as evidence that government intends to revive the sector.

The argument is therefore about whether existing industrial capacity should be treated as recoverable economic infrastructure rather than simply collateral available for disposal.

SIGNIFICANCE:

For policymakers, lenders and investors, the issue raises a fundamental question about development finance: should recovery be measured solely by how much of a defaulted loan is retrieved, or also by how much productive capacity survives?

Salman cited Japan and South Korea’s post-war industrial recoveries and the United States’ 2009 automotive bailout as examples of interventions designed to preserve strategic productive capacity.

“The lesson is not that government should keep pouring money into inefficient companies,” he said. “The lesson is that strategic productive capacity should not be destroyed before a disciplined recovery test has been completed.”

He argued that development finance should help viable businesses regain competitiveness and mobilise private capital rather than defaulting immediately to liquidation.

NEXT MOVE:

The critical question is whether BOI and other public lenders will introduce a formal recovery test separating “distressed but recoverable” factories from fundamentally failed enterprises.

Restructuring, new management, strategic investors, patient capital and operational turnaround plans could provide alternatives to outright liquidation where the underlying industrial asset remains viable.

OUR LENS:

Nigeria may be approaching its textile revival from both ends of the problem, trying to create new policy support while allowing existing productive infrastructure to disappear.

That is economically self-defeating if factories with recoverable assets are dismantled before their rehabilitation potential is properly assessed.

“A liquidated factory may repay part of yesterday’s loan,” Salman said. “A successfully restructured factory can repay the loan while preserving jobs, paying taxes, buying from farmers, supporting transporters and suppliers, substituting imports, and earning foreign exchange for years to come.”

The deeper issue is therefore not whether creditors should recover their money. They should. It is whether Nigeria can recover the money without liquidating the industrial capacity it will later have to spend far more money rebuilding.

Johnson Emmanuel is a journalist, covering business, economic affairs and issues of significance to Nigeria’s corporate and public sectors.