Out of 14 subsectors in the manufacturing sector, four expanded last month, according to the latest Purchasers Managers Index (PMI).
The report by the Central Bank of Nigeria showed that the subsectors are Furniture & Related Products (58.5 points), Petroleum & Coal Products (55.0 points), Cement (53.3 points), and Electrical Equipment (51.5 points).
But the four subsectors that expanded are lower than the six that improved in June.
Nigeria’s manufacturing PMI is a gauge from a manufacturing point of view and therefore uses their responses to set questions on core variables in their businesses.
A PMI above 50 points shows that the manufacturing/non-manufacturing economy is generally expanding, 50 points depicts no change and below 50 points indicates that it is generally contracting.
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The July manufacturing PMI of 49.6 index points is, however, an improvement from the 47.3 index points recorded in June as there has been a gradual normalisation of the economy with inflation cooling off at 33.4 percent in July.
“Although the manufacturing sector increased we are still not doing well as the sector is yet to reach the average PMI data,” Adeola Adenikinju, president of the Nigerian Economic Society (NES), said
He added that the expectation of the economy is still very weak and that will continue to impair the future growth of the economy combined with the high inflation rate, energy cost, and naira devaluation, among others.
Further analysis of the PMI report revealed that manufacturing supply delivery time contracted in July at 45.7 points as well as the level of new orders (48.2 points), employment level (49.8 points), inventory/ stock (49.2 points), export order (44.0 points), import order (46.7 points), quantity of goods/farm produce/ services (41.2 points), and outstanding business (49.7 points).
While production (53.4 points), the average price per output (59.5 points), average input price (64.0 points), and stock of finished goods/ farm (54.7 points) expanded in July.
The first contraction reported this year was in February at 45.5 index points. March, April, May, and June also recorded contractions of 43.5, 49.3, 43.4, and 47.3 points respectively.
According to another PMI report by Stanbic IBTC Bank, business activity in Nigeria fell for the first time in eight months as a result of price pressures which weakened demand.
The headline index declined to 49.2 in July from 50.1 in June 2024.
“The renewed worsening in the health of the private sector mainly reflected the first reductions in output and new orders since November last year. In both cases, rates of decline were only modest,” the report said.
It stated that however, anecdotal evidence continued to highlight the negative impact of sharp price increases on customer demand, with clients often unwilling or unable to commit to new projects.
“Selling prices continued to increase sharply at the start of the third quarter as companies passed higher input costs through to their customers,” it said. “This was despite the rate of inflation easing to the slowest since May 2023 amid reports from some panelists that they had lowered charges as part of efforts to secure sales.”
