The manufacturing sector Purchasing Managers Index (PMI) has reversed its previous gains, declining to 48.2 index points in January 2017 from 52.0 in December 2016 according to the Central Bank of Nigeria (CBN).
With this decline, the hope of many stakeholders who were initially optimistic of a turnaround in the economy following last month’s surprise jump in the PMI has been dashed.
The Manufacturing and Non-Manufacturing PMI Report on businesses is based on data compiled from purchasing and supply executives. Survey responses indicate whether there is change or no change in the level of business activities in the current month compared with the previous month.
A breakdown of the PMI report reveals production level growing at a slower rate, new orders declining from expansion in December 2016, supplier delivery time worsening, employment level declining faster and raw material inventories declining from expansion in December 2016.
Specifically, the manufacturing purchasing managers index averaged 45.2 in the last twelve months, and had grown in December 2016 after recording declines for eleven consecutive months.
Robert Omotunde, head, investment research, Afrinvest Securities limited said the Manufacturing PMI measures the economic health of the manufacturing sector. The sector as with the rest of the economy has been battered by the challenges in the FX market and this is predominantly responsible for the decline. Manufacturing Real GDP as at Q3:2016 contracted 2.63 percent points Year-on-Year, from -1.75 percent in 2015 to -4.38 percent in 2016 (according to data from NBS), highlighting the decline in the sector’s performance.
“We believe the action or inaction towards implementing the urgent reforms needed in FX market will dictate the performance of the manufacturing sector in the short term”, he said in an emailed response to BusinessDay.
According to the report, ten of the sixteen sub-sectors surveyed recorded decline in the review month. They include primary metal; transportation equipment; paper products; electrical equipment; fabricated metal products; printing and related support activities; cement; furniture and related products; plastics and rubber products; and chemical and pharmaceutical products.
The remaining six subsectors are expected to expand in the order of petroleum and coal products; appliances and components; non-metallic mineral products; food, beverage and tobacco products; textile, apparel, leather and footwear; and computer and electronic products.
The production level index for manufacturing sector grew for the second consecutive month. The index stood at 51.3 points, indicating a slower growth when compared to the 57.6 points in the month of December 2016.
Nine manufacturing sub-sectors recorded growth in production level during the review month in the following order: non-metallic mineral products; computer and electronic products; appliances and components; food, beverage and tobacco products; petroleum and coal products; cement; chemical and pharmaceutical products; textile, apparel, leather and footwear; and furniture and related products.
The plastics and rubber products sub-sector remained unchanged, while the remaining six sub-sectors declined in the review period in the order: primary metal; transportation equipment; paper products; fabricated metal products; electrical equipment; and printing and related support activities.
The index for new orders declined to 47.9 points after one month of expansion recorded in December 2016. The eight sub-sectors that declined in new orders were: primary metal; paper products; printing and related support activities; fabricated metal products; electrical equipment; transportation equipment; cement; and furniture and related products.
The chemical & pharmaceutical products sub-sector remained unchanged, while new orders for the remaining seven sub-sectors grew in the order: petroleum and coal products; appliances and components; computer & electronic products; plastics and rubber products; textile, apparel, leather and footwear; nonmetallic mineral products; and food, beverage and tobacco products.
At 48.5 index points, the supplier delivery time index for manufacturing sub-sectors worsened for the second consecutive month, but at a slower rate in the month of January 2017. The index had recorded nine consecutive periods of improvement as at November 2016.
The ten sub-sectors recorded worsening suppliers’ delivery time include plastics & rubber products; petroleum & coal products; chemical & pharmaceutical products; transportation equipment; appliances & components; cement; non-metallic mineral products; food, beverage & tobacco products; furniture & related products; and textile, apparel, leather & footwear.
The computer & electronic products sub-sector remained unchanged, while the electrical equipment; primary metal; printing & related support activities; fabricated metal products; and paper products sub-sectors recorded improving delivery time in January.