Recently, the Central Bank of Nigeria (CBN) released Nigeria’s Purchasing Managers Index (PMI) for Nov-19. Interestingly, the two primary indexes, manufacturing and non-manufacturing, continued on the path of expansion, at 59.3 and 60.1 points, being their highest levels in over 2 years. Analysing the sub-indices for the manufacturing PMI, the performance was largely positive.
The production level, new orders, supplier delivery time, employment level and raw material inventory index all grew at a faster rate. However, the new export orders remained in the contractionary region, although it declined at a slower rate. Notably, this was the same narrative for new export orders in the non- manufacturing sector. As such, the persistent weakness in export orders can be attributed to slower external demand amid fierce competition with lower-priced products from other countries.
Looking ahead, we expect the manufacturing sector’s GDP which recovered in Q3-19 growing 1.1% y/y vs -0.1% y/y in Q2-19 – to continue on the path of expansion in Q4-19. This is on the back of the sustained improvement seen in the manufacturing PMI in Oct-19 and Nov-19 respectively. Also, we expect the sector’s growth to be supported by the renewed appetite by banks to lend to the real sector – with credit growth to the manufacturing sector between May-19 to Oct-1 9 up by N459.7bn. However, the overall performance is expected to be capped by the inadequate and dilapidated state of the country’s critical infrastructure.
United Capital Research.
