Manufacturing Sector Experiences Contraction In April As Nigeria’s PMI Decline 17-Month Low In June

Nigeria PMI Decline 17-Month Low In June - Oriental News NigeriaYemisi Izuora

The Central Bank of Nigeria, CBN, has reported that the Manufacturing sector contracted for the second time in April, noting how important it is to consistently intervene in critical sectors to enhance growth.

According the Deputy Governor, Financial Systems Stability Directorate of the Bank, Aishah Ahmad, “Continued interventions especially in growth enhancing sectors is, thus, critical to sustain momentum in economic activity and stimulate aggregate demand.

This she notes is in view of the manufacturing purchasing manager’s index which contracted for the second consecutive month at 48.9 index points in April 2022 from 49.10 index points in the previous month,” she said.

Also, that there are concerns pointing that available high-frequency indicators including the manufacturing Purchasing Manager Index and the MAN CEO confidence index suggests that 2022 quarter two growth may fall below that of quarter one.

Report indicates that manufacturing PMI stood at 48.9 index points in April 2022, lower than the 49.10 points recorded in March 2022, marking two months of consecutive decline, below the accepted 50 index points threshold. “The non-manufacturing PMI for April looks better at 49.5 index points, compared with 48.10 index points in March 2022.”

However, the sub-sectors that recorded significant growth during the period included rail transport and pipelines, air transport, metal ores, financial institutions and telecommunication and information services by 124.5, 50.68, 30.76, 25.43 and 14.50 per cent, respectively.

Also, oil refining, crude petroleum and natural gas, road transport, quarrying and other minerals all contracted by 44.26, 26.04, 24.63, and 13.72 per cent, respectively.

He said, “The contraction in the oil sector amid rising oil prices was due to pipeline vandalism and oil theft, with adverse consequences on Federal Government revenues, accretion to external reserves and exchange rates.

The manufacturing purchasing manager index contracted for the second consecutive month at 48.9 index points in April 2022, compared with 49.10 index points in March 2022.

This was driven by a decrease in production, employment levels in manufacturing, and supplier delivery. Overall, the modest recovery was driven, in part, by the continued intervention programmes of the Central Bank of Nigeria.

Meanwhile, StanbicIBTC report shows hat the Nigerian private sector remained in growth territory at the end of the second quarter, although recent challenges around cash shortages led to weaker new order growth and a renewed decline in output. As a result, business conditions improved at the weakest rate for almost a-year-and-a-half. Companies responded by raising their staffing levels, purchases and stocks of inputs at softer rates in June.

On the price front, steep cost pressures persisted with overall input price inflation quickening to a four-month high.

The headline figure derived from the survey is the Purchasing Managers’ IndexTM PMI.Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

At 50.9 in June, down from 53.9 in May, the headline PMI signalled a twenty-fourth successive monthly improvement in business conditions in Nigeria’s private sector. That said, the latest result was indicative of the weakest improvement for 17 months.

Central to the moderation was a renewed contraction in output which fell for the first time in 19 months. Although marginal overall, the latest fall contrasted with sharp expansions in recent months. Firms overwhelmingly blamed weaker inflows of new work, but there were also mentions of cash shortages.

Meanwhile, new orders rose for the twenty-fourth month in a row. The rate of growth was marginal and eased to the softest in this sequence, however, as elevated costs deterred some clients from placing orders.

Turning to prices, overall input price inflation quickened from May, and was the fourth- steepest in the series history. Firms reported higher purchase costs (particularly for fuel and raw materials) and rising staff costs.

Subsequently, and in line with weaker inflows of new work, purchasing activity rose at the weakest pace since January 2021. Stocks of purchases continued to rise sharply however, and at a rate that was in line with the long-run series average.

Staffing levels rose for the seventeenth month in succession during June amid efforts to boost output. That said, the rate of growth was modest with some firms engaging in restructuring efforts.

Modest expansions in new business, paired with another uptick in headcounts led to a twenty-fifth successive reduction in backlogs. Shortages of some key parts resulted in the weakest decline in backlogs for 17 months, however.

Finally, sentiment regarding output in the year ahead remained firmly in positive territory in June. Although, there were some signs that soaring inflation weighed slightly on hopes with the degree of optimism moderating from May.

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