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Nigeria Manufacturing PMI sees steep rise to 53.9 points in June
After recording its lowest ever Manufacturing PMI at 43.3 points in May, FBN Quest's PMI recorded a steep rise to 53.9 points in the month of June. Chinwe Egwim, Economist at FBN Quest Merchant Bank joins CNBC Africa for more.
Wed, 01 Jul 2020 14:05:26 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 manufacturing PMI in Nigeria increased from 43.3 in May to 53.9 in June, driven by improved access to raw materials and a pickup in demand due to the easing of lockdown restrictions.
- Challenges such as supply chain disruptions, subdued consumer confidence, and limited access to affordable credit continue to impact the sector's performance.
- The Central Bank of Nigeria has implemented targeted interventions to support manufacturing operations, but the sector is expected to face a contraction in the second quarter amidst ongoing economic challenges.
The manufacturing Purchasing Managers' Index (PMI) in Nigeria experienced a significant jump from its lowest point ever at 43.3 in May to 53.9 in June, according to FBN Quest PMI. This surge was largely attributed to the gradual easing of lockdown measures and restrictions imposed due to the COVID-19 pandemic, allowing manufacturers improved access to raw materials. However, challenges such as supply chain disruptions and subdued consumer confidence still linger. The Central Bank of Nigeria's targeted interventions have provided some support to manufacturing operations but the sector's performance outlook remains uncertain, according to the Manufacturers Association of Nigeria. One of the key drivers of the increase in output was a visible pickup in demand following the partial easing of lockdown restrictions. While the employment sub-index saw a slight improvement, the overall macroeconomic environment is not conducive for business expansion. The operating environment for manufacturers has been challenging, with the sector experiencing a downturn in the past few months due to limited access to foreign exchange and general economic hardships. Affordable credit remains a major issue for manufacturers, exacerbated by the current macroeconomic challenges. However, the CBN has introduced measures to assist businesses impacted by the pandemic, including restructuring of loans and financial support. Looking ahead, the second quarter is projected to show a contraction in the manufacturing sector, though not as severe as initially anticipated. The first half of the year saw both positive and negative readings for the PMI, with the average pulled down by the negative impact of the coronavirus outbreak. As restrictions continue to be eased, there is a possibility of the rising trend in the manufacturing sector continuing, fueled by increased economic activity and strengthening demand. However, the sector is likely to settle at some point, and the extent of growth will depend on various factors such as effects liquidity, consumer confidence, and overall economic recovery. More data points are needed to accurately gauge the sector's outlook amid the ongoing easing of restrictions in Nigeria. Before the pandemic, demand was soft in the manufacturing sector, indicating that while the rebound is promising, challenges still remain in the path to sustained growth. The overall outlook for the sector mirrors the projected trend of Nigeria's GDP, which is expected to contract by the end of 2020.
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