The manufacturing sector sets the part for economic recovery as the Purchasing Managers Index (PMI) recorded the first expansion after six months to 50.2 points in November 2020 from 49.4 contractions recorded in October 2020.
This was driven by improvement in suppliers’ delivery time, which stood at 52.2 points in the month under review, new orders at 50.5 points, and production level at 51.7 points.
The Central Bank of Nigeria (CBN) on Wednesday released the PMI report, which shows that suppliers’ delivery time was faster, new orders and production level increased while employment level and raw materials inventories contracted.
“The improvement in PMI must be partly due to the recovery activities following the EndSARS unrest which affected business activities across major cities in Nigeria,” Taiwo Oyedele, Head of Tax and Corporate Advisory Services at PwC said.
In addition to this, he said businesses are also gearing up to meet increased demands associated with the end of the year. The main challenge will be how to sustain the PMI improvement beyond December.
A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.
The November 2020 PMI survey was conducted by the Statistics Department of the Central Bank of Nigeria during the period of November 9-13, 2020. The respondents were purchasing and supply executives of manufacturing and non-manufacturing organizations in all 36 states in Nigeria and the Federal Capital Territory (FCT).
The report noted that out of the 14 subsectors surveyed, 8 subsectors reported expansion (above 50% threshold) in the review month.
These include transportation equipment, Non-metallic mineral products, Furniture, and related products, Cement, Textile, apparel, leather and footwear, plastics and rubber products, food, beverage and tobacco products, and Printing and related support activities. The remaining 6 subsectors reported contractions in the following order: Electrical equipment, Petroleum and coal products, Chemical and pharmaceutical products, Primary metal, Paper products, and Fabricated metal products.
“The expansion in the PMI is in line with my expectations that the PMI will cross 50 points towards the end of the year 2020. This is the first expansion since May 2020,” Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited said.
The expansion he said represents faster growth in the suppliers’ delivery, new orders, and production level during the period. “This should improve going forward and should point to better economic performance,” Akinwunmi said.
However, the PMI for the non-manufacturing sector stood at 47.6 points in November 2020, indicating slowing contraction in activities compared to 46.8 points recorded in October 2020.
Of the 17 surveyed sub-sectors, 3 subsectors reported growth, while 13 subsectors reported declines.
The November 2020 production level index for the manufacturing sector stood at 51.7 points, indicating recovery from the contraction recorded since May 2020.
