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NIGERIA PMI - Marginally slower economic expansion in August

NIGERIA PURCHASING MANAGERS' INDEX                                                      

Marginally slower economic expansion in August                                           

Economic activity expanded once again in August as both Manufacturing (53.6) and Non-Manufacturing (54.1) Purchasing Managers’ Indices (PMI) recorded above-50 readings for the fourth consecutive month. Even as recently released Q2’17 GDP numbers indicated that the Nigerian economy exited recession with a 0.55% y/y growth, strong PMI readings indicate a resilient economic recovery in Q3’17, suggesting a possible improvement in economic activities.                                              

Nigeria’s nascent economic recovery should be supported by continued stability in oil production, which in turn buoys Federal Government revenues, foreign exchange liquidity, and energy supply in the country. However, amidst still-strong pricing pressures (July Inflation: 16.1% y/y), consumers remain squeezed and a shot to aggregate demand is sorely needed, perhaps by escalating efforts in rolling out the Homegrown School Feeding Programme and Conditional Cash Transfer Scheme. Similarly, haste is required in 2017 Budget capital expenditure disbursements, amidst a ₦350 billion capex release at the start of September. We stress the importance of Federal government capital expenditure, both in supporting short-term aggregate demand, and in upgrading Nigeria’s productivity.