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NIGERIA OCTOBER PMI - October readings improve after September slump

Perception of business activity has deteriorated every month this year, according to the CBN Purchasing Managers’ Index (PMI) which revealed a Manufacturing PMI reading of 42.5 and 44.1 and a Non-Manufacturing PMI reading of 41.0 and 43.4 for September and October respectively. Nevertheless, the improvement in October’s reading (though still below the “no change” threshold of 50) offers some hope for the final quarter of the year. The PMI figures make grim reading as they indicate that business activity is still contracting but we can draw out different trends for the months. Notably, October Manufacturing PMI is the highest since May 2016 (45.8) which suggests a regression in the pace of decline in productive activity moving past Q3. In contrast, the malaise in September is evidenced by the observation that all 16 subsectors of the manufacturing index experienced declines – the first time on record.    Non-Manufacturing PMI slipped to its lowest reading of the year in September (41) as Business Activity (sub-40 for the first time) and Raw materials inventories in particular stalled significantly. Following this, less steep declines in Business Activity and Level of New Orders led to a slighter drop in non-Manufacturing productive activity in October as composite PMI registered at 43.4.Â

The data broadly suggest a persistently weaker business environment as aggregate demand remains depressed. Consumer spending has been dampened by lower real wages just as investment has stalled on uncertainty and high interest rates. Looking to the end of the year, a ramp up in government spending and an improvement in the current account (oil production is likely to have been back above 2 million barrels per day in October but non-oil exports need to rise as well) will be the main drivers of a rebound. We expect both PMI readings to remain below 45 in November as business expectations remain subdued.Â