FBNQuest’s manufacturing PMI recovers to 53 points in April

Nigeria's manufacturing Purchasing Managers' Index (PMI) showed a recovery, rising from 51.4 points to 53 points in the month of April. This positive uptick was discussed by Chinwe Egwim, Economist at FBNQuest Merchant Bank, in an interview with CNBC Africa. The increase in the headline PMI reading for April was driven by improvements across four out of five sub-indices, including output, workforce delivery times, stocks of purchases, and better access to raw materials. Despite this improvement, the manufacturing sector in Nigeria continues to face challenges such as inflationary pressure, which impacts profitability. Egwim highlighted that demand remains fragile, with consumers feeling the pinch of high inflation rates, particularly in food items reaching 22%. This situation poses challenges for manufacturers as they struggle to pass on the higher production costs to consumers. Looking ahead, Egwim remains cautiously optimistic about the future of the sector, expecting the PMI reading to hover around the 50s in the coming months, with potential boosts from seasonal celebrations like Eid. The push for growth in Nigeria's manufacturing sector comes in the context of the African Continental Free Trade Area (AfCFTA), which Nigeria ratified earlier this year. The AfCFTA presents opportunities for Nigerian manufacturers to compete in a larger market, but they need to improve their service delivery and product standards to stay competitive. The federal government has set a target of achieving a 20% share of GDP from the manufacturing sector by 2023, a goal that Egwim sees as ambitious given the current share of below 15%. While Nigeria exited recession in Q4 2020, Egwim remains cautious about the sustainability of the recovery, citing ongoing challenges like inflation and weak consumer purchasing power. The government's efforts to stimulate the economy through infrastructure investments and fiscal stimulus are positive steps, but Egwim emphasizes the need to address underlying structural issues to ensure sustained growth. The conversation also touched on the debate around minimum wage increases, with Egwim acknowledging the pressures faced by both workers and state governments amid rising inflation rates and revenue constraints. Overall, while there are reasons for cautious optimism, Egwim emphasizes the importance of continued monitoring and addressing key economic challenges for Nigeria's manufacturing sector to thrive.