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NIGERIA PMI - Economic expansion slows slightly in May

The Central Bank of Nigeria (CBN) released its Purchasing Managers’ Index (PMI) readings for the month of May, indicating that the economy expanded at a slightly slower pace across both manufacturing and non-manufacturing sectors. Manufacturing PMI fell from 56.9 to 56.5 as Production and Employment Levels quickened but New Orders and Inventories decelerated. Likewise, Non-Manufacturing PMI declined from 57.5 to 57.3 as Employment levels expanded faster and growth slowed in the other three components.                                                                    

Non-Manufacturing PMI has consistently outpaced Manufacturing PMI as it has registered higher in all but two of the last twelve months dating back to June 2017. Q1’18 GDP numbers tell a different story and industrial activity has fared better than agriculture and services in recent times – Manufacturing GDP: 3.4% y/y, Agriculture: 3.0% y/y, Services: -0.5% y/y. Ultimately, GDP figures are more relevant as they are based on realized output while PMI is a survey of business confidence which is subject to measurement error, sample bias, etc. As such, we are cautious when drawing inference from PMI data, but still consider it a useful quick gauge of economic activities.                                                                              

Nigeria’s economic recovery is being supported by a low 2017-base, FX market stability and slowing inflation. We expect the imminent passage of the 2018 Budget and pre-election spending to provide a short-term fiscal stimulus on the economy and highlight the impact of political uncertainty on investment as the primary risk to business activity in the near-term.