Nigeria manufacturing and non-manufacturing activities contracted in October, but at slower pace compared to September, according to the Central Bank of Nigeria (CBN) survey. In the month under review, the CBN manufacturing and non-manufacturing Purchasing Manager Indices (PMIs) picked up to 44.1 and 43.4 respectively.
While acknowledging the slower contraction compared to September, both indices are now below the 50 threshold that separates expansion from contraction for the tenth consecutive month.
The latest PMI survey results, which are not the best this year, suggest that economic and business activities are yet to considerably pick-up, and supports consensus expectation for contraction this year. That said, the pick-up in the PMIs, if sustained for the rest of the year, will be consistent with the broad expectation for a modest GDP growth in fourth quarter of 2016. Companies are generally adjusting to the challenges in the economy.
Particularly in respect of foreign exchange issues which has had substantial negative effect on the cost of doing business, manufacturers are gradually adjusting by (1) looking inwards to substitute as much imports as possible; (2) passing on costs through upward price adjustments; and (3) devoting some percentage of their total output to exports in search of foreign exchange.
Manufacturing PMI at 44.1 (vs. 42.5 in September), the manufacturing PMI shows a slower contraction in manufacturing activities amid faster expansion in supplier delivery time and slower declines in production level, new orders and raw materials inventories. For information, fourteen of the sixteen sub-sectors surveyed recorded declines in the review month in the following order: electrical equipment; primary metal; fabricated metal products; petroleum & coal products; transportation equipment; computer & electronic products; printing & related support activities; nonmetallic mineral products; plastics & rubber products; furniture & related products; paper products; textile, apparel, leather & footwear; cement and chemical & pharmaceutical products.
The remaining two subsectors expanded in the order: appliances & components and food, beverage & tobacco products. Clearly, manufacturers are still faced with difficulty accessing foreign exchange, high energy cost and a tightening monetary policy. Although short term responses have generally being to pass on resultant costs to consumers, we doubt that confidence has strengthened among firms about the broader view of the economy.
Non-Manufacturing PMI, the non-manufacturing PMI (43.4 vs. 41.0) also declined at a slower rate, supported by business activity, level of new orders and raw materials inventories. Sixteen out of the eighteen sub-sectors in this category contracted, viz: construction; management of companies; public administration; professional, scientific, & technical services; accommodation & food services; wholesale trade; utilities; repair, maintenance/washing of motor vehicles; real estate, rental & leasing; electricity, gas, steam & air conditioning supply; finance & insurance; transportation & warehousing; arts, entertainment & recreation; health care & social assistance; water supply, sewage & waste management and information & communication. On the other hand, educational services and agriculture expanded further. Stuck below 50 however, the index seemingly reflected weak confidence among firms about the economy.