Nigerian economy grapples with COVID-19 as manufacturing PMI dips

Latest statistics released by the Central Bank of Nigeria shows that Nigeria’s Manufacturing sector has continued to witness contraction, as the economy grapples with the spiral effects of the COVID-19 pandemic.

According to the latest data, manufacturing PMI (i.e., Purchasing Manager’s Index) in the month of June stood at 41.1, indicating that the contraction in the manufacturing sector for the second time is a decline compared to 42.4 and 51.1 index points recorded in May and March 2020 respectively.

Of the 14 surveyed subsectors, 5 subsectors reported growth (above 50% threshold) in the month of June in the following order: electrical equipment; cement; petroleum & coal products; transportation equipment; and paper products.

However, the remaining 9 subsectors reported declines in the following order printing & related support activities; textile, apparel, leather & footwear; primary metal; plastics & rubber products; nonmetallic mineral products; fabricated metal products; food, beverage & tobacco products; chemical & pharmaceutical products and furniture & related product.

As the manufacturing index recorded a decline, production level, new orders, employment level, and raw material inventories all recorded further decline compared to their May 2020 figures.

The composite PMI for the non-manufacturing sector stood at 35.7 points in June 2020, indicating contraction for the third consecutive month, but showing a gradual recovery in non-manufacturing activities when compared to 25.3 recorded in May 2020.

For each of the indicators measured, the report shows the diffusion index of the responses, which is computed as the percentage of responses with positive change plus half of the percentage of those reporting no change, except for supplier delivery time, which is computed as the percentage of responses with negative change plus half of the percentage of those reporting no change.

The latest PMI figure below 50 for the second consecutive months implies that Nigeria may post a bigger than expected contraction in the second quarter of 2020, as yet uncertainty clouds the global economy in the remaining quarters of the year.

Also, as key sectors continue to suffer contraction, unemployment may surge in the economy. According to the Economic sustainability plan recently released by the Nigerian government, unemployment may hit c.40% by the end of 2020.