April 4, 2024/CSL Research

The Nigerian Manufacturing Purchasing Managers Index (PMI) gauges the activity level of purchasing managers in the manufacturing sector. A reading above 50 signals expansion, while below 50 indicates contraction. The March 2024 PMI remained steady at 51.0, mirroring February’s level and indicating consistent business activity. However, the PMI report for March 2024 revealed a decline in employment but an increase in new orders.

The surge in global commodity prices coupled with the Naira’s depreciation against foreign currencies has elevated the import expenses of crucial goods and materials. Consequently, this has contributed to an overall inflationary pressure for businesses.

The nation’s headline inflation rate has soared to 31.7%, marking the highest recorded rate. In response, businesses have been exercising caution, delaying expansion plans and investment decisions due to uncertainties surrounding potential alterations in regulations, tax frameworks, and foreign exchange policies. Consequently, this cautious approach has resulted in a stagnation of business activities in March 2024.

The recent increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) may add pressure to borrowing costs, particularly impacting the manufacturing sector of the economy. This could potentially dampen clients’ new orders within the sector and impede the expansion of the Purchasing Managers’ Index (PMI) in the forthcoming months.

However, if the recent policies implemented by the apex bank succeed in stabilizing the Naira against foreign currencies and the Dangote refinery begins supplying refined petroleum products into the economy, these developments could serve as additional incentives to sustain both the Manufacturing and Non-Manufacturing sectors. Consequently, this could help keep the nation’s PMI above the crucial 50.0 threshold.

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