December 29,2020/Proshare

By CSL Research  

According to the data released by the Central Bank of Nigeria (CBN) on the Purchasing Managers’ Index (PMI) for the month of December, activity levels in both the manufacturing and non-manufacturing sectors showed a decline compared with the previous month (November) and both PMI readings were below the 50-point threshold. Specifically, the manufacturing PMI decelerated to 49.6 in December from 50.2 in November, indicating a contraction compared with the previous month. Similarly, the non-manufacturing PMI declined to 45.7 in December from 47.6 in November, indicating a steeper contraction in the sector. 

Across the key indices in the manufacturing PMI, while some indices experienced  marginal decline like Production level (-0.1) and New orders (-0.3), the remaining indices witnessed moderate decrease like the  Suppliers’ delivery time (-1.0), Employment level (-1.0) and Raw materials/WIP Inventory (-1.6). In our opinion, infrastructural challenges (such as faulty or obsolete machines), FX scarcity which continues to limit the ability to produce more and import raw materials, weakening consumer demand evidenced in the decline in raw materials/WIP and new orders respectively coupled with weak labour employment were the major contributors to the slowdown in the manufacturing sector. The data further showed that, of the 14 subsectors surveyed in the manufacturing sector, four compared with six in November reported growth while nine compared with eight in November contracted.  

In the same vein, the non-manufacturing PMI also showed weakness across the four key indices used in measuring activity level; New orders (46.9 to 45.1), Employment level ( 46.7 to 45.1), Inventory level (46.1 to 45.7) and Business activity contracted from the expansionary level of 50.5 recorded in the previous month to 46.9. We believe the Covid-19 second wave causing movement restrictions has limited the scale of operations of service-based organisatons.