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Home Business News Politics

This data confirms businesses are ‘smiling’ again

Gbenga AgoyebyGbenga Agoye
5 years ago
in Politics
How The Government Is Killing Small Businesses
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The Purchasing Managers’ Index rose to 56.8 points in July 2017 for the fourth consecutive month, albeit at a slower pace than the 57.0 points recorded in June.

This was reported in the Purchasing Manager Index (PMI) released by the Central Bank of Nigeria (CBN) for the month of July, 2017.

According to the report, the index grew at a slower rate, when compared to its level in the previous month.

The same report also show that the Manufacturing PMI recorded a 54.1 index points in July 2017, indicating expansion in the manufacturing sector for the fourth consecutive month. This is an improvement from the Manufacturing PMI of 52.9 index points recorded in June

This sustained positive trend in the Purchasing Manager Index reflects the positive perception of business owners and manufacturers on the series of recent policy interventions and economic development plans by the federal government.

These developments range from the recently launched Economic Recovery and Growth Plan (ERGP), the executive orders on ease of doing business, and the relative stability in the FX market; thanks to flow of dollars to the market from the CBN’s interventions.

Of course, the introduction of investors’ and Exporters’ window which has tremendously improved liquidity in the Fx market also played crucial part in this positive trend.

For instance, the Manufacturers generally benefit from the CBN’s increased Fx interventions because it boosted Fx liquidity significantly and as such aided their importation of inputs for their production activities.

Source: CBN

Meaning and Implications of PMI

A PMI is a result of an exercise where selected companies are asked their view each month on core variables in their business. This Index (PMI) shows the economic health of the manufacturing and non-manufacturing sector.

A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.

So, in effect, the recent data is an indication that the economy is on a positive trend which is in tandem with the recent trend recorded by other macroeconomic indicators.

It will be recalled that the NBS reported a decline in the June inflation to 16.1 % and the recent encouraging trend in the economic growth rate which put the rate at 0.52 % year-on-year signalling an improvement from the decrease of 1.7% recorded in Q4:2016.

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