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NIGERIA PMI - Green Shoots in April Readings

​Green Shoots in April Readings
According to the Central Bank of Nigeria (CBN), the domestic business environment kicked off the quarter on a more positive note as Manufacturing Purchasing Managers’ Index (PMI) registered 51.1 in April (March: 47.7), depicting an improvement in the manufacturing environment. Meanwhile, though April Non-Manufacturing PMI showed a contraction (49.5), this was an improvement over March reading (47.1) and significantly, a 16-month high. We believe the sustained supply of dollars in the foreign exchange (FX) market in recent months would have gradually improved operational activities of importing firms and those with dollar obligations.

The positive Manufacturing PMI reading was strongly driven by a record Production Level reading (58.5) as businesses reportedly ramped up production during the month. In fact, only two out of sixteen sub-sectors failed to report an increase in production levels in April, showing a broad improvement. The manufacturing sector was also propped up by expansions in New Orders (50.1) and Inventories (50.6), which recorded their first above-50 readings since November 2015 – excluding seasonally higher December figures. Notably, Supplier Delivery Time (47.5) contracted after a brief rebound in March (51.3). Even this can be read positively as weaker supplier delivery times tend to be correlated with heightened business activity given Nigeria’s logistical challenges. 

Despite the encouraging reading, employment continues to lag as both Manufacturing (46.6) and Non-Manufacturing (45.5) Employment Levels came in below 50 for the twenty-sixth straight month, demonstrating the endemic weakness of the labour market. In fact, only 5 out of a combined 35 sub-sectors across both manufacturing and non-manufacturing reported an expansion in employment levels in April. As Nigeria’s economy looks set to return to recovery, it is important that this is accompanied by job creation in order to achieve sustainable growth.

We expect the sustained CBN interventions to improve business sentiment and activity. We highlight the persistent inflationary pressure (March inflation: 17.3%) as a possible dampener and stress the need for fiscal stimulus to buttress the prospective economic recovery.