According to the CBN monthly Manufacturing and Non-manufacturing Purchasing Managers’ Index (PMI) report for March 2020 released this week, Nigeria’s manufacturing sector expanded for the thirty-sixth consecutive month while the non-manufacturing sector contracted for the first time, after thirty-four consecutive month of expansion. A PMI reading below 50 index point indicates sector contraction, while PMI reading of 50 index point indicates neutrality, and PMI above 50 points indicates sector expansion.
According to the data released, the overall manufacturing PMI reading for March settled at 51.1 index point. This is 720bps lower than the 58.3 index point expansion recorded in the previous month. Of the five major sub-components of the manufacturing PMI, New orders and Production Level saw weaker expansion at 52.3 and 54.4 index points in March compared to 59.1 and 58.9 index points in February. This could be attributed to the partial closure of some manufacturing firms in other to contain the spread of Covid-19.
On the other hand, there was a contraction in Supplier Delivery Time (49.4 index point), Employment level (47.1 index points), and Inventory build-up (49.4 index point) as against 58.4, 56.4, and 58.5 index points in the preceding month respectively. This we believe was in reflection of the preventive measure paced in other to contain the spread of CoViD-19 such as travelling restriction placed by some countries in the world as well as some states in Nigeria, social distancing and closure of schools.
Similarly to the manufacturing PMI index, the Non-manufacturing PMI went into contraction from 58.6 index point in February to 49.2 index point in March. The contraction was attributed to a contraction in three (3) out of four (4) diffusion indices, namely; New Order (47.8 index point from 58.8 index point), Employment Level (47.3 index point from 57.8 index point) and Inventories (49.6 index point from 58.6 index point) save for Business Activities which recorded slower expansion by 52.2 index point from 59.3 index point in February.
Owing to the rising number of the global mortality rate of Covid-19 and increase in the number of infected cases in Nigeria which is already forcing some states to go into partial lockdown and could force the federal government to go for a tougher measure such as total lockdown, we expect both the manufacturing and non-manufacturing PMIs to go into contraction in the coming months as a result of low business activities, a low number in the inventory, high supplier delivery time and low order of new goods and services which could arise from the action.