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NIGERIA PMI - Solid start to Q2’18 as cyclical recovery continues

Solid start to Q2’18 as cyclical recovery continues                                                                           

The Nigerian economy kicked off Q2’18 in good form, evidenced by strong April purchasing managers’ indices readings for both the manufacturing and non-manufacturing sector. Registering at 56.9 and 57.5 respectively, the economy expanded at its strongest pace since January.                                                                   

In the manufacturing sector, employment levels (53.3 to 55.0), supply delivery times (56.5 to 57.4), and raw material/WIP inventories (59.4 to 59.5) all improved at a faster pace in April, while production level (59.1 to 58.6) and new orders (56.1 to 55.8) expanded at a slower pace. The quicker pace of expansion in the non-manufacturing sector came on the back of acceleration across all sub-indices, with business activity (58.8) and raw material inventories (59.5) leading the way. Looking at non-manufacturing sub-sectors, Arts, Entertainment & Recreation (66.3) and Finance & Insurance (64.8) expanded the quickest in April, the Construction sector (53.5) expanded after March’s contraction (49.7), and Wholesale trade (55.7) continued to wax strong, indicating a healthier underlying economy.                                                                                

Nigeria’s cyclical economic recovery has continued on a steady growth trajectory so far in 2018. This is positive as the continued recovery should support consumer spending power and the labour market, but also signals the absence of significant policy stimulus to jolt the economy unto a higher growth path. Whilst we do not foresee much change on this front in the interim, we highlight probable changes in inflation and interest rates as the most likely factors to alter the current growth path.