Improved PMI reading foreshadows awaited recovery of businesses
Nigeria’s manufacturing Purchasing Managers’ Index (PMI), a gauge for manufacturing sentiments, has continued its upward movement on a monthly basis signifying the gradual recovery of business activities in the country’s manufacturing sector.
The PMI moved from 51.4 points in March to 53 points in April with improvement recorded for four out of the five sub-indices examined, according to data by FBN Quest and NOI. This was driven by activities in the cement industry which emerged a winner during the COVID-19 pandemic.
“Cement has proved highly resilient in life with COVID-19. Accounting for 9.8 percent of constant price manufacturing output, its growth of 3.9 percent last year was the highest of all segments other than the 4.0 percent posted by a small player (motor vehicles and assembly)” the report stated.
This was further affirmed by the first quarter financial statements of listed cement producers in Nigeria, where Dangote Cement and Lafarge Africa recorded sales growth of 22 percent and 41 percent respectively.
The report also suggests that the federal government’s action towards its infrastructure development program paved the way for the cement industry to thrive.
Noting the federal government’s ambitious proposed plan to improve manufacturing share of GDP to 20 percent by 2023, which as of 2020 stood at 12.8 percent, they believe this is part of why the ministry of industry plans to finalize development strategies for the oil palm, clothing and textile sectors later this year.
Analysts at FBN Quest also assume that this decision was influenced by the success stories of East Asian countries where commercial agriculture provides raw materials for many manufacturing goods.
However, despite the upward movement of the PMI which is a forward-looking indicator of economic performance, analysts do not believe that it will impact the economic performance particularly for the first quarter of 2021.
The economy exited recession in the fourth quarter of 2020 after two-quarters of successive declines even though there was a contraction of 1.92 percent for the full year.
“Neither the national accounts nor our PMI is seasonally adjusted, this is one reason why we do not share the confidence of the authorities that the positive growth achieved in Q4 will be maintained in the report from the statistics bureau for Q1,” analysts at FBN Quest said.