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NIGERIA PMI - Steady expansion continues in third quarter

NIGERIA PURCHASING MANAGERS' INDEX

Steady expansion continues in Third quarter

Purchasing Managers’ Index (PMI) readings for July showed a steady expansion across both manufacturing and non-manufacturing sectors. Manufacturing PMI registered at 54.1, up from 52.9 in June whilst Non-Manufacturing PMI registered at 54.4, up from 54.2 in June. Economic recovery held up in July even amidst a high cost and high interest rate environment, as greater foreign exchange (FX) liquidity and improving business sentiment propped up economic activities.

We note that exactly a year ago, July 2016 was an uncertain period for the economy given fairly recent changes to fuel prices, foreign exchange policy, and interest rates. Contrastingly, July 2017 was a particularly strong month for the non-manufacturing sector; all four sub-indices expanded (all four declined in July 2016) whilst all but two of eighteen sub-sectors expanded during the month, compared to July 2016 when only the agriculture sector registered growth.

July PMI figures showing continued improvements in Real Estate (52.6) and Trade (52.5) bode well for the general economic landscape. Headline economic growth is likely to be driven by steady agriculture growth and a recovery in oil volumes, but fiscal stimulus is required to drive inclusive economic recovery. On this note, a more efficient rollout of Social Intervention Programs, along with capital expenditure disbursements from the 2017 Budget, are crucial for boosting underlying aggregate demand.