Impact of Foreign Trade and Investment on Nigeria’s Textile Industry: The Case of China

Abstract

The textile industry in Nigeria is the third largest in Africa after Egypt and South Africa. It is the largest employer of labour in the manufacturing sector. The industry is mainly controlled by large private-sector firms, often with substantial foreign participation. Low productivity levels limit Nigeria’s export possibilities. Nevertheless, the substantially liberated economic environment and the opportunity Nigeria offers to avoid quota restrictions under the Multi Fibre Agreement (MFA), which is not applicable to Nigeria have induced some foreign entrepreneurs, mostly from Asian countries, to establish export-oriented plants. The bilateral trade between Nigeria and China has grown steadily since 1971 as the volume of trade between the two countries in 2009 hit $6.373billion. In order to analyze the effects of higher imports over exports on the textile industry and the aggregate economy, the complete structural model is constructed with market equilibrium identity, such that total supply of agricultural, industrial, and oil sectors equal aggregate demand. The effect of imports on other macroeconomic variables was tested using nth order vector-regressive model. More private investments are highly needed in the Nigerian textile industry to make it internationally competitive.