August manufacturing PMI declines to 42.1 per cent, says CBN
The Central Bank of Nigeria ( CBN) yesterday reported that activities in the manufacturing sector in the Nigerian economy shed weight by 2 per cent compared with the volume of July.In its Manufacturing Purchasing Managers’s Index (PMI ) Report, the apex bank said activities declined to 42.1 index points in August 2016, compared to 44.1 in the preceding month, thus confirming an e Arlie’s survey conducted by NOIPolls in May which indicated that activities in the sector were on the downward trend.
The CBN PMI Report interpreted the August survey thus : “ This implies that the manufacturing sector declined at a faster rate during the review period. Of the sixteen manufacturing sub-sectors, fifteen recorded decline in the review month in the following order: nonmetallic mineral products; transportation equipment; petroleum and coal products; fabricated metal products; furniture and related products; cement; appliances and components; printing and related support activities; paper products; computer and electronic products; food, beverage and tobacco products; primary metal; textile, apparel, leather and footwear; plastics and rubber products; and chemical and pharmaceutical products. The electrical equipment sub-sector remained unchanged in the review period,” it added .
The Statistics Department of the CBN conducts a monthly survey of purchasing and supply of manufacturing and non-manufacturing organisations in 13 locations in Nigeria: two states in each of the six geo-political zones, and the FCT. The survey result is used to compute the monthly Purchasing Managers’ Index (PMI).
The survey for August , according to the apex bank was conducted August 16th to 24th, 2016, and recorded a response rate of 79.7 per cent, with a total of 1,555 responses received from a sample of 1,950 respondents.
Meanwhile, the Chief Executive Officer of NOI Polls , Dr. Bell Ihua, last week while presenting his organization’s survey on the Manufacturing sector survey which she undertook with collaboration with CSEA (Centre for the Study of the Economies of Africa) attributed the fall in manufacturing PMI to a number of factors. These include; unavailability of petrol and diesel, poor power supply, policy inconsistency, and limited access to credit are cited as major challenges facing the manufacturing sector in Nigeria. Majority of the manufacturers surveyed stated that, compared to one year ago, the availability of petrol/diesel (80 per cent), power supply (73 per cent), policy inconsistency (55 percent), and access to credit (49 per cent) have worsened.
In addition,, he said about 78 percent of companies revealed they have been negatively affected by the disparity in foreign exchange rates (in the official and parallel markets). This cuts across the different company-size categories as large 83 percent, Medium 76 percent, and Small 78 per cent indicated this negative impact of foreign exchange (forex). This finding is particularly poignant as 52 per cent of sampled companies disclosed that they are highly dependent on imported inputs in their production, and only 25 per cent indicated that the export market was highly important to their turnover. Furthermore, a majority of sampled firms (60 per cent) decried the lack of support within their current business environment; with at least 90 per cent of the firms not operating up to their optimum installed capacity, and 45 per cent operating below 60 per cent of installed capacity.
However, Nigerian Manufacturers are upbeat and have a positive outlook on the economy over the next one year, with 76 percent expecting economic conditions to improve.
In summary,, he added : “ due to the chronic challenges of infrastructure and inputs, the Nigerian manufacturing sector is yet to transit from a demand-driven regime to a supply-driven regime that is essential for long-run growth.
In the present demand-driven regime, population growth estimated at 3.2 percent per year is expected to strengthen local demand and stimulate growth, most notably in the necessities subsectors – food and textiles. The contraction of these two sectors during the period reviewed presents an ominous sign that needs to be carefully analysed and clearly understood. Responses to the poll show that the manufacturing sector remains dependent on the international market, buying inputs many times more than it supplies products to foreign markets. These are some of the key findings from the Manufacturing Sector Survey conducted in May 2016.”
Among the companies sampled, about 60 percent consider the current business environment unsupportive, with only 31 percent stating that the environment is supportive. Interestingly, the geographical breakdownshows that while companies in the North East (93 percent), North West (73 percent) and South East (68 percent) find the business environment unsupportive; only companies in the South West (65 percent) seem to suggest that the business environment is somewhat supportive. Overall, one a scale of 1 to 5, the average score for the business environment is 2.6 points, which is about average.
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