The Central Bank of Nigeria (CBN) released July Purchasing Managers’ Index data, showing that economic momentum in the country is little-changed month-on-month. Whilst the manufacturing sector expanded at a slower pace (from 57.0 to 56.8), the non-manufacturing sector accelerated mildly (from 57.5 to 57.7).
Non-manufacturing growth outstrips manufacturing growth
The manufacturing sector expanded more slowly as all sub-indices save for Supplier Delivery Times decelerated in the month. Meanwhile, Quantity of Purchases made by manufacturers rebounded (51.1) after a contraction in June (47.6), pointing to a healthy stock of raw material for future industrial production. Manufacturing growth was broad-based, as all but one (Plastic & Rubber Products) of fourteen sectors expanded in the month. The nonmanufacturing sector expanded at a quicker pace, driven by more rapid growth in all sub-indices save for New Orders. Likewise, all but one (Management of Companies) of seventeen sectors expanded in the month.
Key feature: CBN expands survey data to boost representativeness
There have been notable changes to the CBN’s PMI survey data since inception (July 2016), some of which have occurred this year. At the start of this year, Manufacturing PMI data covered 16 manufacturing sub-sectors, but that number fell to 15 between February and April and has been 14 since then. Likewise, Non-Manufacturing PMI data covered 18 non-manufacturing sub-sectors at the start of this year, 16 in February, briefly covered 18 subsectors in April and May, before dropping to 17 in June. On a more positive note, the apex bank has increased the number of states included in the PMI survey from 13 states initially (2 per geopolitical zone plus the FCT) to all 37 states (FCT incl.) for the first time in July 2018. It is clear from this improvement in survey coverage that the CBN is trying to improve the representativeness of PMI samples which bodes well for data credibility. Although the reduction in the number of sectors covered comes as a surprise, it may indicate a higher threshold for data acceptance i.e. sectors have been excluded if data collected is not up to scratch. Finally, we note that from
September 2017, the CBN no longer includes survey response data in PMI reports. From inception till that time, the apex bank surveyed 1,950 firms each month with an average response rate of 86%.
Q3 momentum unlikely to change, election clouds outer months
We do not anticipate much change in economic momentum for the rest of this quarter. As we move closer to elections, the policy will take a back seat to electioneer and managers may become more cautious. However, government expenditure and campaign spending should support economic momentum, with sectors more closely linked to the public sector and campaign outlays likely to benefit the most.
VETIVA RESEARCH
