Nigeria Economy | |
Nigeria Economy | |
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PROSHARE | |
PROSHARE |
Monday, June 01, 2020 / 10:38 AM / by FBNQuest
Research / Header Image Credit: Proshare
Our
manufacturing Purchasing Managers' Index (PMI), the first of its genre in
Nigeria, slipped from 45.8 to 43.3 in May. Our partner, NOI Polls, has compiled
the data. The index can be found in advanced economies such as the ISM's in the
US, larger EMs like China, India and Russia, and some other frontier markets.
It is based upon manufacturers' responses to set questions on core variables in
their businesses. In our case, it is not seasonally adjusted. Our highest
reading was 68.7 in December 2017 and our lowest is now 43.3, having previously
been 44.6 in January 2016.
In our
unweighted model (that of the Institute for Supply Management), respondents are
asked whether output, employment, new orders, suppliers' delivery times and
stocks of purchases have increased over the previous month, are unchanged or
have declined. A headline reading of 50 (ex 100) is neutral, and anything
higher points to expansion in the sector.
Our
sample of respondents is a representative mix of small, medium-sized and large
companies across the six geopolitical zones.
PMIs,
unlike the national accounts, are forward-looking indicators with a proven
record of moving financial markets in advanced economies and the largest EMs.
There have been some particularly large monthly swings of more than ten points
this year due to Covid-19.
The
changes in our index have been subdued in comparison. The full lockdown was
uneven across the country, and shorter in duration than in most advanced
economies. Also, Nigerian manufacturing broadly produces for the domestic
market so has been less buffeted by weak external demand and border closures
than G7 economies, for example.
All five
sub-indices are now in negative territory, reflecting the higher cost of, and
reduced access to raw materials. This in turn is a function of the lockdown and
the related decline in fx availability: the CBN has not supplied the Investors' and Exporters (I&E) window since late March.
A very
small number of companies reported an improvement in May, notably for new
orders and stocks. The prevalent trend, however, was a shift from no change to
a deterioration. From our trigger questions we learnt that companies had been
further hit by inter-state restrictions. These questions arise when a
respondent has given the same answer for a sub-index for two successive months
and changes it for the third.
For June
we could well see a little more activity due to the easing of restrictions. An
improvement in fx access still looks elusive.
On a
12-month moving average basis, the headline index retreated from 52.1 to 51.5
in May.
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