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Nigeria’s PMI drops to 51.1 points in May
FBNQuest Manufacturing Purchasing Managers’ Index for Nigeria showed a decline to 51.1 index points in May from 53 points in April. FBNQuest PMI report notes that the persistent economic challenges have impacted consumer behaviour, hence the fragile consumer demand. Chinwe Egwim, Economist at FBNQuest Merchant Bank joins CNBC Africa for more.
Tue, 01 Jun 2021 14:34:43 GMT
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AI Generated Summary
- The FBN Quest Manufacturing Purchasing Managers' Index for Nigeria dipped to 51.1 points in May, signaling a decline in economic activity influenced by persistent challenges.
- Economic struggles have significantly affected consumer behavior, leading to fragile consumer demand in the country.
- Manufacturers are grappling with issues such as weak demand, inflationary pressures, supply chain disruptions, and foreign exchange uncertainties.
Nigeria's Purchasing Managers' Index (PMI) took a slight dip to 51.1 index points in May from 53 points in April, according to the FBN Quest Manufacturing Purchasing Managers' Index report. The report highlights how persistent economic challenges have influenced consumer behavior, leading to fragile consumer demand in the country. Chinwe Egwim, an economist at FBN Quest Merchant Bank, shed light on the factors contributing to this decline. She emphasized that economic struggles continue to impact consumer behavior significantly, resulting in fragile consumer demand. The report noted that despite seasonal boosts to demand in recent months, they were short-lived due to ongoing economic constraints. Egwim highlighted the issue of squeezed pockets and the continuous double-digit inflation rate since February 2016, adding further pressure on consumer spending.
One crucial aspect affecting the manufacturing sector's profitability is the current inflationary conditions in Nigeria. Egwim mentioned that aside from existing structural challenges, heightened insecurity in various parts of the country has disrupted the movement of goods, with ongoing curfews in specific states compounding the issue.
Discussing the subindices, Egwim pointed out that each of the components experienced a marginal decline in performance. For instance, the employment subindex witnessed a slight decrease, reflecting a cautious approach by business owners in hiring additional labor amidst the challenging macroeconomic environment. When asked about the manufacturers' major challenges, Egwim reiterated that weak demand, an issue predating the pandemic, continues to persist. She emphasized that poor demand affects new orders, subsequently impacting stock purchases and output levels.
In addition to demand-related challenges, supply-side constraints have worsened post-pandemic, exacerbating the difficulties faced by manufacturers. Insecurity in the country has further impeded the movement of goods, prompting manufacturers to seek alternative strategies for sourcing raw materials and delivering finished products to marketplaces.
Regarding foreign exchange access, Egwim mentioned that manufacturers are primarily concerned with the availability and pricing of foreign exchange, rather than any perceived devaluation of the currency. Looking ahead, Egwim expressed cautious optimism for the PMI readings, expecting them to remain above the critical threshold despite minimal fluctuations. She anticipates a marginal shift in the upcoming months but does not foresee any significant boost in demand.
In conclusion, the FBN Quest PMI report underscores the challenges faced by the Nigerian manufacturing sector, ranging from weak consumer demand and inflationary pressures to supply chain disruptions and foreign exchange concerns. As the country navigates these issues, stakeholders are urged to adopt resilient strategies to sustain operations and drive economic recovery.
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