Nigeria Economy | |
Nigeria Economy | |
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Monday,
August 03, 2020 / 09:10 AM / By FBNQuest Research / Header Image
Credit: Ditto Trade
Our manufacturing Purchasing Managers' Index
(PMI), the first of its genre in Nigeria, declined gently from 53.9 to 52.8 in
July. 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 43.3 in May this
year.
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 such as China in
February and March. There have been some large monthly swings of more than ten
points this year due to Covid-19.
Our own index posted a
ten-point move in June as Nigeria emerged from its own lockdown. There were
expected robust increases for readings for output, new orders and stocks of
purchases as the country played catch-up.
The headline weakened a
little in July yet remains in positive territory. By way of explanation, it may
be significant that: Nigerian manufacturing produces overwhelmingly for the
domestic market and so is little affected by the collapse in external demand;
and it is dominated by consumer goods firms, many of which produce core
elements in the household shopping basket.
Relatively few firms are
moving the dial. The most popular response is 'no change', which accounts for
at least 55 per cent of answers in all five cases.
Before too long, the index
should further reflect the impact on the sector of fx shortages. The CBN has
not supplied the investors' and exporters' (I&E) fx window for four months.
Other than the rainy season, the most common reply to our trigger questions
this time was that operations had been hit by the poor access to, and high cost
of raw materials. These questions arise when a respondent has given the same
answer on a sub-index for two months and changes it for the third.
On a 12-month moving
average basis, the headline index rose from 51.8 to 52.1 in July.
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