FBN Quest’s manufacturing Purchasing Managers’ Index, which measures activities of the manufacturing industry in Nigeria, declined sharply from 55.0 to 44.5 in January as producers complained of a scarcity of raw materials and foreign exchange.
The PMI is based upon manufacturers’ responses to set questions on core variables in their businesses. FBN Quest’s highest reading to date has been 68.7 in December 2017 and the lowest 43.3 during the lockdown in May 2020.
A reading of 50 and above indicates a manufacturing sector that is doing well and expanding while a reading below 50 signifies a declining or shrinking sector.
PMIs, unlike the national accounts, are forward-looking indicators. They can move financial markets, at least in advanced economies and the large emerging markets.
Answers by respondents observed that raw materials had become scarce and more expensive. Foreign exchange has not been freely available since Q1 of 2020 (pre-COVID-19, essentially) and importers have to consider the parallel market for their needs.
Another trend across the readings in January is that, while medium-sized and small companies reported deterioration for all sub-indices, large operations noted minimal change from the previous month. It may be that the firms have a steadier customer base and did not suffer a prominent fall-off in new orders in January.
They were more confident of repeat orders.
The reading for employment was below water at 49. Since gross domestic product per head has not been positive since Q3 of 2015, the business has been reluctant to hire additional labour.
According to the National Bureau of Statistics, the unemployment rate in Q2 of 2020 was 27.1 per cent and the underemployment rate a further 28.6 per cent.
FBN Quest noted that the most common response in its surveys was ‘no change.’