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Seizing Opportunities in Nigeria’s Blossoming Fashion Industry

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When are we likely to have fashion brands, made in Africa from locally sourced materials and labor on display in fashion stores across the world?Would it be in 3, 5, 10 or 15years?Sub-Saharan Africa’s apparel and footwear market is reportedly worth $31 billion according to data by Euromonitor. Extrapolation from the report shows Nigeria’s apparel and footwear market is estimated to have a market worth of $4.7 billion. This is significantly behind the market worth of South Africa’s apparel and footwear market with $14.4 billion.

Nigerian Labels such as Maki Oh – recently worn by Beyonce, Jewel By Lisa and Ikiré Jones are establishing themselves as international brands beyond the continent but for a nation brimming with culture, creativity, talent, ambition and natural resources a lot more Nigerian and African designs, made in Nigeria from locally sourced materials and labor need to grace more fashion stores across the world.

Achieving the lofty goal of having more African fashion brands, made in Africa from locally sourced materials and labor on display in fashion stores across the world in an environment plagued by poor infrastructure, poverty, corruption, protectionism, bureaucracy and political instability coupled with the challenge of keeping up with Asia’s low price points and colossal outputs won’t be an easy task but it is certainly achievable.

The apparel and clothing industry value chain begins with the production of cotton and moves through the spinning and twisting of the fibre into yarn, the weaving and knitting of the yarn into fabric, and the bleaching, dying and printing of the fabric to obtain the fashionable garment worn worldwide today. At each step of the value chain, more value is added and additional jobs are created. Targeting the fashion industry means targeting the whole value chain, from the smallholder farmers to the fashion designers and fashion retailers.

Nigeria was on track to become an epi-centre for global textile production until the early 1990s, when it could no longer keep up with Asia’s low price points and colossal output coupled with political instability in the 1980 – 1990s. Since then, textile manufacture in Nigeria has fallen by 75 per cent. The cotton, textile and garment sector used to be the largest employer after the government, with over 175 mills at its peak in the 1980s. Today it has a mere 30 companies operating.

According to The AFDB investing in the creative industries report, Sub-Saharan Africa apparel sector presents big challenges that are common to the different countries:

  • Textile production facilities are missing in most of the countries as they require more investment than apparel/clothing facilities;
  • Small-scale producers and designers cannot access industrial production: from customised/unique to retail setup;
  • Skills shortage and lack of industry-specific training facilities;
  • Constrained access to financing for entrepreneurs and SMEs;
  • Limited local and regional input suppliers and export companies;
  • Coping with changing end-market requirements (seasonality, costs, quality, volume, deliveries, styles, lead times), making skills and flexibility increasingly important;
  • Lack of institutional and government support to the sector in many Sub-Saharan Africa countries;
  • Relationship with Asian investors and buyers: many agents;
  • The need to develop intra-African exports and markets;
  • Limited access to information, including trends, buyers, market data;
  • Regulatory issues, tariffs and exchange rates affect exports;
  • Poor infrastructure – water, waste, energy, ports, roads, customs.

At the same time, there are significant opportunities in the Sub-Saharan Africa textile and apparel sector that can be pursued:

  • Increased productivity through training;
  • Access to cheaper labour in Sub-Saharan Africa versus increasing wages in China and South-East Asia;
  • Access to untapped local and regional markets for fashion, apparel and accessories;
  • Integration in international value chains by addressing aspects of competitiveness;
  • Attracting global buyers to increase exports, replicating successful models in Sub-Saharan Africa;
  • Working with national and regional institutions to develop the skill sets that the industry requires;
  • Brand building, with Africa as a fashion hub: ‘African fashion for African people’.

While still in its infancy, the Nigerian fashion industry has started to expand. This is largely due to growing interest in Africa’s cultural traditions, including its vibrant hues and colourful fabrics, such as wax and printed dyed cotton, and the high quality of craftsmanship in African cultures. The industry and its designers, both on the continent and abroad, are capitalising on this situation, with Africa-inspired designs now regularly shown on the catwalks in fashion shows in Paris, London and Milan. Additionally, demand for African fashion is likely to be further boosted by the continent’s growing urban middle class, opening up the perspective of sustainable growth for the African fashion industry.

To seize these opportunities, apparel, clothing and footwear players in Nigeria’s fashion industry need to do three things;

  • Look to the East

In the last few years, a number of European companies—among them, H&M, Primark and Tesco began sourcing some of their garments from Ethiopia. The rest of the global apparel industry took notice. Since 2013, there has been rising interest in not just Ethiopia but also other East African countries as potential sourcing destinations for apparel. Also contributing to the buzz is the renewal of the African Growth and Opportunity Act (AGOA) which gives certain countries in Sub-Saharan Africa including Nigeria duty-free access to the $225 Billion US apparel, clothing and footwear market making it possible for apparels from Sub-Saharan Africa to compete favorably with apparel from China in US apparel stores.

All top 10 apparel exporting countries in Sub-Saharan Africa are in Eastern and Southern Africa. They represent only 0.55 percent of world apparel exports.

Country Apparel exports

2013; US$ million

Percentage of

world exports

Approx. no. of apparel factories
Mauritius761.30.17 percent174
South Africa502.90.11 percent450
Lesotho417.90.11 percent43
Madagascar381.10.08 percent71
Kenya279.30.06 percent22
Botswana72.40.02 percent≈10
Swaziland52.80.01 percent≈18
Ethiopia36.50.01 percent66
Tanzania170.004 percent22
Malawi10.60.002 percent<10
Total 2,531.5 0.55percent

Source: McKinsey, 2016, Sourcing in a Volatile World: The East African Opportunity

In Ethiopia, Apparel buyers today are sourcing basic, large-volume items: T-shirts accounted for 46 percent of the country’s exports to the EU-15, and trousers 31 percent. As much as 60 percent of exports are sent to Germany and 10 percent to the United States. But Ethiopia accounts for a mere 0.01 percent of total apparel exports, according to the World Trade Organization.

Despite still importing cotton and dealing with unreliable power from the power grid just as in Nigeria, why is Ethiopia still attractive to apparel buyers?

According to McKinsey report on East Africa: The next hub for apparel sourcing, the biggest reason is cost; Ethiopia’s wages for garment workers are among the lowest globally, at below $60 per month and work-permit costs for foreign workers are less than one-tenth those in neighboring Kenya. Additionally, Ethiopia has low electricity prices. The country has a strong supply of hydroelectric power, and while the power grid is not the most reliable, the Ethiopian government is building a separate grid for new industrial zones currently under development.

Like Ethiopia, Kenya’s apparel industry currently specializes in supplying high-volume bulk basics such as trousers, which account for 58 percent of its exports to the United States. The typical minimum order size is 10,000 pieces; the country’s larger players have minimum order sizes of 25,000 to 50,000 pieces.

Kenya has benefited greatly from AGOA—92 percent of its apparel exports in 2013 went to the United States, according to UN Comtrade.

The capacity of Kenya’s garment factories has grown markedly in recent years, thanks to foreign direct investments from Asia and the Middle East, as well as support from the Export Processing Zones developed by the Kenyan government. Factories have grown larger and more efficient; they now have around 1,500 employees on average compared with around 560 in the year 2000.

However, as a result of the lack of a local upstream industry, manufacturers must import fabrics—which means considerably longer lead times. Fabrics from overseas can take up to 40 days to make their way through customs and to a garment factory. Manufacturers and buyers alike said that another challenge of doing business in Kenya is comparatively high labor costs, with monthly wages for garment workers in the $120 to $150 range. Energy costs are also high, and because the power supply is spotty, factories often have to rely on generators. In Africa, power from generators works out to be four times as expensive as power from the grid.

Interested players in the apparel manufacturing space in Nigeria can look to East African nations for inspiration on how the common challenges of energy supply and availability of raw materials have been overcome by leveraging cost advantage, opportunities from AGOA, investment attractiveness and large population of semi-skilled workforce to plug into the global apparel market.

There is no reason why Nigeria should not join the list of top 10 apparel exporting nations by year 2020 contributing up to 0.1 percent of global apparel exports despite energy and raw material challenge considering the large population of young Nigerians that have shown interest in Fashion possessing a strong entrepreneurial drive and assess to investments.

  • Nigeria as production partner to global brand

Nigerian and Sub-Saharan African fashion businesses can plug into the global apparel and footwear industry by positioning as production partners to global fashion brands especially luxury brands.

A growing emphasis on valuing what has been made by hand as luxury is challenging current perceptions of what defines luxury, and it is this area of production that could potentially tap into the strength and quality of artisanal craftsmanship produced across Africa’s diverse regions, providing an opportunity for growth by aligning fashion brands whose products demand a high level of skill and craftsmanship with a pool of highly skilled craftsmen.

Newcomer brands like Oliberte have capitalized on African innovations in manufacturing technology. Oliberte produces in Ethiopia with Hafde Tannery, one of the most progressive and sustainable leather tanneries in the world. Oliberte is noted as the world’s only Fair-trade certified footwear factory. Its recent collaboration with trendsetter Hype Beast to design a part of its collection was notably well-received.

In Nigeria, a Kano based tannery – God’s Little Tannery was reported to supply hide to a number of luxury brands overseas. God’s Little Tannery skins are shipped to Southern Italy where they are bought by leather agents the Romano brothers who in turn sell them to a local tannery called Europell. At Europell, the hides are turned into suede and then sold on to factories in Tuscany and northern Italy that produce clothes, bags and shoes for a host of designer brands, including Yves Saint Laurent, Ralph Lauren, Fendi, Gucci, Louis Vuitton, Jimmy Choo and Valentino.

If Nigeria is to experience sustainable growth in garment and leather manufacturing, the accidental success of God’s Little Tannery has to be structured and scaled across different product categories.

Collaboration among all stakeholders is also a must. Nigerian suppliers will need to embrace performance improvements and management training, upgrade their facilities and offerings, and enter into long-term partnerships with buyers across the world. All parties will need to make every effort to ensure social and environmental compliance. Buyers, for their part, would do well to support the capability-building efforts of Nigerian suppliers and begin to evaluate the region as a true strategic partner in the value chain rather than just a retail market.

With competitive labour costs, Africa has the potential to claim a much greater share of the world’s apparel, clothing and footwear manufacturing output, but to achieve this, significant international investment is needed to build the industrial infrastructure required to compete with the likes of Asia. Nevertheless, a few bright spots are now emerging where clothing and footwear factories are creating both competitive products and sustainable jobs, such as in Mauritius, Ethiopia, Kenya, South Africa and Madagascar.

The criteria shaping sourcing decisions of firms leading the industry are:

  • Lead times and flexibility
  • Non-manufacturing capabilities
  • Consolidation of the supply base
  • Compliance (labour and environmental standards)

Nigerian and African fashion businesses seeking to position as production partners to global brands must therefore ensure capability across these four key considerations.

  • An Urgent Need for Formal Fashion Retailing

Fashion retailing in Nigeria is still predominantly informal and fragmented creating a need for fashion brand owners to forward integrate and own their stores thus increasing the cost burden and operational complexities on fashion brand owners. There is a need for Nigeria fashion brands to adopt others stores before ours approach to retailing their designs. This creates an opportunity for formal fashion retailing in Nigeria.

Fashion retailing in Africa is dominated by three South Africa based fashion retailers, Mr. Price Group, Woolworths Holdings and TFG (The Foschini Group) along with other listed African retailers such as Rex Trueform Clothing Company and Edgars Stores.

Woolworths Holdings is deeply rooted in the continent and have risen to become such a major international player. In 2014, the mid-market chain turned over 39.7 billion rand ($3.4 billion), representing sales from the group’s 427 stores in its home market of South Africa, 567 in Australia and 65 Woolworths stores across 11 other African countries including Zambia, Mozambique, Botswana, Kenya, Tanzania, Ghana, Mauritius, Namibia and Uganda.

From an operational perspective, what this means is that a designer in South Africa can leverage the 427 stores of Woolworth Holdings in South Africa as distribution network to retail their design while a designer in Nigeria will have to build their own flagship store and be contented to distribute their fashion item through this sole channel to a limited number of walk in customers.

There is a business opportunity for formal fashion retail channels in Nigeria with the market penetration, vast distribution network across major Nigerian cities and the infrastructure to stock a number of fashion brands from different designers making it easy for fashion customers to purchase fashion products by their favorite designers and also making it possible for fashion brands in Nigeria to push out volume without the cost burden and operational complexities of owning their own stores.

In conclusion, the fact that Nigeria has the largest population, biggest economy and a growing consumer market in a rising Africa makes the country a prime spot for businesses seeking to tap into Africa’s imminent boom in consumer spending.

Due to its large population especially women and young people, low wage especially for low skilled workers and AGOA opportunities, Nigeria has the potential for up-to 250 apparel manufacturing companies producing basic, large volume fashion items such as T-Shirts and Trousers for fashion brands across the world. Also, as a result of the continuous existence of a large pool of antisanal craftsmanship in the apparel and footwear industry in Nigeria, the skill level of craftsmen can be upgraded and offered to luxury brands seeking hand-made inputs in their production process.

Nigeria’s rising middle class households expected to rise from around 10 million in 2015 to nearly 15 million in 2030 provides a mouth watering opportunity for fashion retailers with a vast network of stores and the distribution infrastructure to push volumes of fashion items by Nigerian fashion brands.

Credit

https://www.mckinsey.com/industries/retail/our-insights/east-africa-the-next-hub-for-apparel-sourcing

African Development Bank (AFDB), Investing in the Creative Industries: Fashionomics,

 

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