The latest manufacturing Purchasing Managers’ Index (PMI) shows that Nigeria’s manufacturing sector expanded for the 25th consecutive months.
This is revealed in the PMI Survey Report released by Central Bank of Nigeria (CBN) for the month of April 2019.
According to the CBN’s report, the Manufacturing PMI in the month of April stood at 57.7 index points, indicating expansion in the manufacturing sector for the period under review.
Some basic highlights
- The Manufacturing sector shows expansion as PMI in the month of April stood at 57.7 index points
- The production level index for the manufacturing sector grew faster and witnessed sustained growth for the twenty-sixth consecutive month
- The new orders index also grew for the twenty-fifth consecutive month, indicating an increase in new orders
- Employment level index witnessed growth for the twenty-fourth consecutive month
- The Non-manufacturing Sector also expanded with the composite PMI at 58.7 points
- Business activity for the non-manufacturing sector grew, although the index growth slowed for the twenty-fifth consecutive month
- New order and employment level indexes also grew for the month
Nigeria’s Manufacturing sector grew faster than before: The CBN report shows that the manufacturing sector grew at a faster rate when compared to the index in the previous month.
Most sub-sectors recorded growth in the manufacturing sector: The fourteen sub-sectors in the review month all witnessed growth. Some of the sub-sectors that recorded growth include:
- Electrical equipment
- Plastics & rubber products
- Petroleum & coal products
- Transportation equipment
- Food, beverage & tobacco products and
- Nonmetallic mineral products.
Further breakdown of Manufacturing PMI
Production Level index for the manufacturing sector grew at 58.8 points:The production level index for the manufacturing sector grew for the twenty-sixth consecutive month in April 2019. The index indicated a faster growth in the current month when compared to the level it was at in March 2019.
New Orders for the review period recorded 57.2 points index: Again, this indicates growth for the twenty-fifth consecutive month.
The manufacturing supplier delivery time index stood at 58.1 points in April 2019, indicating slower supplier delivery time.
Employment Level index for April 2019 stood at 57.0 points: This indicates growth in employment level for the twenty-four consecutive month. The index has recorded growth for twenty-third consecutive months.
Raw material Inventories index for the Manufacturing sector grew for April 2019 stood at 57.5 points, indicating growth in inventory index for the twenty-fifth consecutive month, the index grew at a faster rate when compared to its level in
Non-Manufacturing PMI increased for two years consecutively- The composite PMI for the non-manufacturing sector stood at 58.7 points in April 2019, indicating expansion in the Non-manufacturing PMI for the 24th consecutive month. The index grew at a faster rate when compared to that in March 2019. This implies non-manufacturing PMI has been on the rise for the past two years.
Growing Sectors- All the 17 sub-sectors surveyed recorded growth. Among others are management of companies; real estate rental & leasing; construction; wholesale/retail trade; agriculture; health care & social assistance; finance & insurance; professional, scientific, & technical services and educational services
Some Breakdown of Non-Manufacturing PMI- Business Activity index grew 58.4 points for the twenty-fifth consecutive month at a slower rate, at a faster rate, indicating expansion in non-manufacturing business activity in April 2019.
New orders index grew at 59.0 points, new orders index grew for the twenty-fifth consecutive month in April 2019. Of the 17 subsectors surveyed, 15 recorded growth in new orders, while 2 remained unchanged in the review month.
The employment level Index for the non-manufacturing sector stood at 59.5 points, 58.7 points, indicating growth in employment for the twenty-fourth consecutive month
Lastly, At 59.5 points, non-manufacturing inventory index grew for the twenty-fourth consecutive month, indicating growth in inventories in the review period.
What rising PMI suggests for the economy- The purchasing managers’ index is an extremely important indicator for international investors looking to form an opinion on economic growth.
PMI has become one of the most closely watched business surveys in the world, favoured by central banks such as the US Federal Reserve, European Central Bank and Bank of England for providing the most accurate advance signals of changing economic growth and inflation.
Basically, when it comes to predicting GDP growth, a sustained reading of higher than 42.0 PMI is considered to be the benchmark for economic expansion. Meanwhile, a sustained reading of below 42.0 could indicate that an economy is heading into a recession.
On the other hand, the difference between 42.0 and 50.0 can indicate the strength of an economic recovery and vice versa for a decline in GDP. Hence, with Nigeria’s infation rate further declining for the third consecutive months as reported earlier, Nigeria’s economy has tendencies for growth going into the second quarter of 2019 and growing manufacturing sector is key.
According to the former CBN governor, Sanusi Muhammadu Sanusi, who recently disclosed at an economic relation’s forum in Kano state:
“PART OF THE PROBLEM IN AFRICA HAS BEEN INSUFFICIENT FOCUS ON THE DEVELOPMENT OF A MANUFACTURING BASE. FOR ALL THE TALK OF DIVERSIFICATION, A FORMALISED SERVICE ECONOMY IS CLOSELY ALLIED TO MANUFACTURING – AND CAN ONLY COME AFTER IT.”