Nigeria PMI - September Data Indicates Slowing Momentum

Tuesday, October 02, 2018 / 03:5o PM / Afrinvest Research

Purchasing Managers’ Index (PMI) numbers from the Central Bank of Nigeria (CBN) indicate that the economy expanded at a slower pace in September, with Manufacturing PMI dropping from 57.1 to 56.2 and non-Manufacturing PMI dropping from 58.0 to 56.5.  

Manufacturing PMI fell to its lowest value this year, with all sub-indices bar Supplier Delivery Times (up from 55.9 to 56.1) expanding at a slower pace. It is important to note that improving Supplier Delivery Times sometimes indicate lower economic activity which eases pressure on logistics. Thus, with businesses also scaling back their purchases of raw materials after ramping up in recent months, signs point towards slowing momentum in the manufacturing sector.  

The dip in non-Manufacturing PMI was also material, making it the second lowest value this year as all sub-indices fell month-on-month. 

Key feature: When will Real Estate & Trade turn?

According to CBN PMI data, the Real Estate and Wholesale Trade sectors have expanded for the past thirteen and sixteen months respectively. However, real output data has remained in the doldrums, with the respective sectors contracting 4% y/y and 2% y/y in Q2’18. Moreover, the Real Estate and Trade sectors of the economy shrank 4% y/y and 1% y/y in 2017 respectively. These sectors are considered bellwethers of economic sentiment and their sustained negative performance points to an underlying weakness in the Nigerian economy. 

No change expected in Q4

September PMI data gives us early indications of slowing economic momentum, which comes as little surprise ahead of the 2019 elections. The only saving grace would be an aggregate demand boost from electioneering activities, though we would not expect this effect to be broad-based. Meanwhile, drawing from PMI data, oil production, and other indications of activity in agriculture and services, we estimate Q3’18 GDP growth of 1.2% y/y, partly weighed by a relatively stronger base in Q3’17.

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