Nigeria PMI hits 3 month-high despite supply constraints

Nigeria’s manufacturing Purchasing Managers’ Index (PMI); a gauge for manufacturing sentiments has shown signs of recovery as it achieved 50.3 points in September according to data by FBN Quest and NOI.

The index had dropped continuously from 51 points in May to 48 points in July before it picked up in August with 49.6 points. However, concerns are raised as to whether the growth recorded reflects the realities of the struggling sector.

Analysts at FBN Quest note that one of the impacts of the global headwinds was the cut in supply of imported inputs and materials used for production by manufacturers in Nigeria.

“The headlines are full of faltering supply chains, which in the case of Nigeria are made worse by challenges surrounding the cost of, and access to foreign exchange,” according to the analysts.

The supply cut caused a shortfall in the availability of raw materials and inputs which drove an increase in production cost to 21 percent in the second quarter of 2021, according to data from the Manufacturers Association of Nigeria (MAN).

Read also: Nigeria’s manufacturing sector records trade deficit of N4.3trn in Q2 2021

Hamma Kwajaffa, director-general, Nigerian Textile Employers Association (NTEA) told BusinessDay that the situation is further aggravated by the scarcity and increased price of raw materials due to the extended lockdown of principal partner countries like Southern China which has clogged ports critical to global trade.

“There are fears that this may intensify in future as China plans to retain its pandemic border restrictions for at least one more year due to the emergence of new variants of COVID-19 and a schedule of major events and exhibitions,” Kwajaffa added.

Disruptions at the global supply chain have propelled manufacturers to look inwards for local sourcing of raw materials and inputs.

Yemi Osinbajo, Nigeria’s vice president said at a recent MAN summit that manufacturers need to expand their capacity and become more competitive through the use of value addition and regional value chain in the production process.

“The regional value chain can be utilised for creation, design, raw material supply, processing, transportation, storage, marketing and sales,” he said.

Nigeria’s manufacturing sector recorded 3.49 percent growth in the second quarter of 2021 which was also the highest Q2 figure across six years. However, analysts at FBN Quest expected a stronger rebound from the -8.8 percent it achieved in the corresponding period of 2020 when the lockdown was in effect.

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