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Nigeria’s FBNQuest PMI plummets to 49.5 – what is influencing the decline?
FBNQuest’s July manufacturing Purchasing Managers’ Index (PMI) for Nigeria sank slightly to 49.5 points from 49.9 in June. To discuss what influenced the decline, Chinwe Egwim, Economist at FBNQuest Merchant Bank joins CNBC Africa for more.
Fri, 02 Aug 2019 15:19:38 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The decline in Nigeria's FBNQuest PMI to 49.5 points was influenced by a drop in the output sub-index and delivery times, exacerbated by seasonal effects like the rainy season.
- Soft demand in private consumption and subdued demand from large consumer goods companies have contributed significantly to the underperformance of the manufacturing sector.
- Despite a marginal improvement in employment driven by temporary factors, the overall business environment in Nigeria has shown fluctuations in PMI readings, with optimism for future improvements based on seasonal trends and upcoming festivities.
Nigeria's FBNQuest Purchasing Managers' Index (PMI) for the manufacturing sector dipped slightly to 49.5 points in July from 49.9 in June, indicating a contraction in the industry. To shed light on the factors influencing this decline, Chinwe Egwim, Economist at FBNQuest Merchant Bank, joined CNBC Africa for an insightful discussion. The key drivers of the drop in the PMI were identified as a steep decline in the output sub-index by five points and a decrease in delivery times. This decline was attributed to seasonal effects such as the rainy season, which presents logistical challenges for businesses. Additionally, soft demand in the private consumption sector has contributed significantly to the underperformance of the manufacturing sector. Large listed companies in the consumer goods space have also reported subdued demand, further impacting the sector. The unfavorable weather conditions during the rainy season have affected the demand for commodities used in social events, adding to the challenges faced by manufacturers. On the supply side, imported inputs and finished goods have remained accessible, thanks to the effects of recent FX reforms by the Central Bank of Nigeria. While there was a marginal improvement in employment, largely driven by recruitment through programs like the NYSC, it was noted that these gains may be temporary. Looking at the broader business environment and economic strength in Nigeria for the first half of the year, the PMI readings have fluctuated, with some months showing neutral or healthy readings, while others, like June, showed a decline. Festivities often support healthy PMI readings, and the upcoming Muslim holiday is expected to positively impact the next PMI reading by boosting demand and output. However, the potential implementation of the 30,000 minimum wage, which could stimulate domestic consumption, has not been factored into the current soft demand outlook. Despite the recent downtrend in the PMI, there is optimism among purchasing managers that the indices will improve in the upcoming quarters. Seasonal effects and festivities are expected to drive a temporary boost in demand and output, providing a potential uplift to the manufacturing sector in the near term.
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