Recently, the Central Bank of Nigeria (CBN) published Nigeria’s Purchasing Managers Index (PMI) report for Sept-2020. According to the report, economic activities remained contractionary during the survey period. This was as the two primary indexes, manufacturing and nonmanufacturing indices, came in below the 50.0pt threshold.
Surprisingly, a month-on-month analysis of the movement in the sub-indices indicated that both the manufacturing and non-manufacturing economic activities mildly weakened, declining at a faster rate, from 48.5 and 44.7 pts in Aug-2020 to 46.9 and 41.9 pts in Sept-2020, respectively.
Notably, of the 14 surveyed subsectors in the manufacturing sector, four (compared to six in August) reported growth, nine (compared to eight in August) contracted while one was stable at 50.0pt. Also, of the 17 surveyed subsectors in the non-manufacturing sector, three (compared to zero in August) reported growth while fourteen (compared to thirteen in August) contracted.
Save for Supplier delivery time which improved marginally, the remaining four sub-indices (Raw materials/WIP Inventory, New orders, Production level and Employment level) used in gauging the manufacturing sector deteriorated during the review period.
Similarly, the non-manufacturing PMI showed weakness across three (Employment level, Business Activity, and Level of new orders) of the four key sub-indices used in gauging activity level within the sector while Inventory level remained flat.
In our view, the weakness across the majority of the indices indicates that economic activities within the country are yet to recover to their preCOVID19 levels. Accordingly, another y/y the contraction in GDP is expected in Q3-2020E, foreshadowing that technically, the Nigerian economy has entered a recession in Q3-2020.
United Capital Plc Research