December 2015 PMI is well above water for now


Monday, January 04, 2016 09:52 AM / FBNQuest Research 


Main conclusions:

·      Very small decline in the headline to 54.2

·      Four sub-indices in positive territory

·      Highest for stocks of purchases

·      Lowest for workforce 


We release today the latest reading (no 33) of our manufacturing Purchasing Managers’ Index (PMI) for Nigeria, which takes the temperature of the sector. Our PMI, which was the first in Nigeria, joins a number of existing surveys of business and consumer confidence and expectations. It has become a core forward indicator for analysts, policymakers and financial market players.   

A PMI is a simple exercise. A selection of companies is asked their view each month on core variables in their business. The respondent, who is characteristically the purchasing manager in a larger firm, has three choices of reply: better, unchanged or worse than the previous month. According to the most used methodology, 50 marks a neutral reading and anything higher suggests that the manufacturing economy is expanding. Readings are released at the very beginning of the new month.

In our case, the five variables are output, employment, new orders, delivery times from suppliers and stocks of purchases. They have equal weightings in our index, and respondents are asked to make allowances for seasonal factors.

Our reports cover a representative sample of the sector with large, medium-sized and small firms. Any broad conclusions about the economy on the basis of our reports need to be tentative because we are operating in a near void: there are few data series on sectoral trends.

GDP growth in Q3 2015 picked up a little from 2.4% y/y to 2.8%. The improvement, however, was driven by the oil sector, which posted growth of 1.1% y/y (after contraction of -6.8% the previous quarter).


The manufacturing sector contracted by -1.8% y/y, compared with -3.8% in Q2). (If we exclude the state-owned oil refining segment, the y/y contraction was -1.2% y/y.) The sector represented 9.3% of constant price GDP in Q3, and its largest segment is food, beverages and tobacco. 

Our latest headline reading shows a very small decline from 54.4 posted the previous month. The headlines for the past three months have all been comfortably in positive territory, and so consistent with the seasonal pick-up in demand for the festivities in December. For this reason, we expect an improvement in GDP growth in Q4, to about 4.0% y/y.

Looking further ahead, we would expect manufacturing to remain under pressure, given its huge appetite for imported inputs and the current question marks over FX availability. In time, a recovery could be driven by the new administration’s policies favouring import substitution and job creation.

Related News

1.       November 2015; Comfortably above water – Dec 01, 2015

2.      PMI reading no 32: Still above water – Dec 01, 2015

3.      PMI reading no 31: a modest pick-up – Nov 02, 2015

4.      PMI reading no 30: Just above the water – Oct 02, 2015

5.      PMI reading no 29: another sign of the times – Sep 01, 2015

6.      August 2015; return to negative territory – Sep 01, 2015

7.      PMI reading no 28: decline in the macro headwinds – Aug 03, 2015

8.     PMI reading no 27: more robust across the board – Jul 01, 2015

9.      July 2015; Back in positive territory – Jul 01, 2015

10.  PMI reading no 26: below water – Jun 01, 2015

11.   PMI reading no 25: good workforce reading – May 04, 2015

12.  April 2015; Comfortably above water – May 04, 2015


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