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Latest PMI shows Nigeria’s manufaturing sector expands yet again in April

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Latest PMI shows Nigeria's manufaturing sector expands yet again

The latest manufacturing Purchasing Managers’ Index (PMI) shows that Nigeria’s manufacturing sector expanded for the 25th consecutive months.

This is revealed in the PMI Survey Report released by Central Bank of Nigeria (CBN) for the month of April 2019.

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According to the CBN’s report, the Manufacturing PMI in the month of April stood at 57.7 index points, indicating expansion in the manufacturing sector for the period under review.

Some basic highlights 

  • The Manufacturing sector shows expansion as PMI in the month of April stood at 57.7 index points
  • The production level index for the manufacturing sector grew faster and witnessed sustained growth for the twenty-sixth consecutive month
  • The new orders index also grew for the twenty-fifth consecutive month, indicating an increase in new orders
  • Employment level index witnessed growth for the twenty-fourth consecutive month
  • The Non-manufacturing Sector also expanded with the composite PMI at 58.7 points
  • Business activity for the non-manufacturing sector grew, although  the index growth slowed for the twenty-fifth consecutive month
  • New order and employment level indexes also grew for the month

Nigeria’s Manufacturing sector grew faster than before: The CBN report shows that the manufacturing sector grew at a faster rate when compared to the index in the previous month.

Most sub-sectors recorded growth in the manufacturing sector: The fourteen sub-sectors in the review month all witnessed growth. Some of the sub-sectors that recorded growth include:

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  1.  Electrical equipment
  2. Plastics & rubber products
  3. Cement
  4. Petroleum & coal products
  5. Transportation equipment
  6. Food, beverage & tobacco products and
  7. Nonmetallic mineral products.

Further breakdown of Manufacturing PMI

Production Level index for the manufacturing sector grew at 58.8 points:The production level index for the manufacturing sector grew for the twenty-sixth consecutive month in April 2019. The index indicated a faster growth in the current month when compared to the level it was at in March 2019.

New Orders for the review period recorded 57.2 points index: Again, this indicates growth for the twenty-fifth consecutive month.

The manufacturing supplier delivery time index stood at 58.1 points in April 2019, indicating slower supplier delivery time.

Employment Level index for April 2019 stood at 57.0 points: This indicates growth in employment level for the twenty-four consecutive month. The index has recorded growth for twenty-third consecutive months.

Raw material Inventories index for the Manufacturing sector grew for April 2019 stood at 57.5 points, indicating growth in inventory index for the twenty-fifth consecutive month,  the index grew at a faster rate when compared to its level in
March 2019.

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Non-Manufacturing PMI increased for two years consecutively- The composite PMI for the non-manufacturing sector stood at 58.7 points in April 2019, indicating expansion in the Non-manufacturing PMI for the 24th consecutive month. The index grew at a faster rate when compared to that in March 2019. This implies non-manufacturing PMI has been on the rise for the past two years.

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Growing Sectors- All the 17 sub-sectors surveyed recorded growth. Among others are management of companies; real estate rental & leasing; construction; wholesale/retail trade; agriculture; health care & social assistance; finance & insurance; professional, scientific, & technical services and educational services

Some Breakdown of Non-Manufacturing PMI- Business Activity index grew 58.4 points for the twenty-fifth consecutive month at a slower rate, at a faster rate, indicating expansion in non-manufacturing business activity in April 2019.

New orders index grew at 59.0 points, new orders index grew for the twenty-fifth consecutive month in April 2019. Of the 17 subsectors surveyed, 15 recorded growth in new orders, while 2 remained unchanged in the review month.

The employment level Index for the non-manufacturing sector stood at 59.5 points, 58.7 points, indicating growth in employment for the twenty-fourth consecutive month

Lastly, At 59.5 points, non-manufacturing inventory index grew for the twenty-fourth consecutive month, indicating growth in inventories in the review period.

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What rising PMI suggests for the economy- The purchasing managers’ index is an extremely important indicator for international investors looking to form an opinion on economic growth.

PMI has become one of the most closely watched business surveys in the world, favoured by central banks such as the US Federal Reserve, European Central Bank and Bank of England for providing the most accurate advance signals of changing economic growth and inflation.

Basically, when it comes to predicting GDP growth, a sustained reading of higher than 42.0 PMI is considered to be the benchmark for economic expansion. Meanwhile, a sustained reading of below 42.0 could indicate that an economy is heading into a recession.

On the other hand, the difference between 42.0 and 50.0 can indicate the strength of an economic recovery and vice versa for a decline in GDP. Hence, with Nigeria’s infation rate further declining for the third consecutive months as reported earlier, Nigeria’s economy has tendencies for growth going into the second quarter of 2019 and growing manufacturing sector is key.

According to the former CBN governor, Sanusi Muhammadu Sanusi, who recently disclosed at an economic relation’s forum in Kano state:

“Part of the problem in Africa has been insufficient focus on the development of a manufacturing base. For all the talk of diversification, a formalised service economy is closely allied to manufacturing – and can only come after it.”

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Lagos State Government orders building owners to conduct structural stability tests

There will also be stricter enforcement of regulations and safety precautions to ensure that building owners and developers across Lagos metropolis comply with it, she reiterated.

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Lagos state govt orders building owners to conduct a structural stability test

In response to the partial collapse of a 3-storey building at Alagomegi-Yaba on Monday, the Lagos State Government has ordered owners of buildings in the state to immediately carry out structural stability tests on their properties. This is expedient, given the onset of the rainy seasons, and the presence of statistics to show that many buildings collapse during the season.

In a series of tweets that were posted last night on the Lagos State Government’s official Twitter handle, the state’s Building Control Agency (LASBCA), disclosed that the affected building at 6, Olonode Street, Alagomeji-Yaba, Lagos, collapsed in the early hours of Monday due to the heavy rainfall in the area over the night.

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The General Manager of the agency, Engr. Biola Kosegbe, noted that the collapsed building had earlier been marked for demolition. In other words, all occupants of the building were evacuated by the Agency before the incident, thereby averting a disaster.

(READ MORE:Lagos increases health workers’ allowances, commissions local production of face masks)

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Kosegbe went on to explain that statistics from previous years show that there is a higher incidence of building collapse during the rainy season, hence the need for building owners to ascertain the level of structural stability of their properties to avert collapse. She added that the Lagos State Government would not hesitate to remove illegal or distressed buildings, or any other structure that is not in conformity with the State’s building laws and standards.

There will also be stricter enforcement of regulations and safety precautions to ensure that building owners and developers across Lagos metropolis comply with it, she reiterated.

Why it matters

This type of pro-active government regulation will help prevent future catastrophes that could occur in the events of building collapse. Incidents of building collapses are not alien to Lagos, a city-state with more than 20 million estimated population, a significant number of whom live in squalid conditions due to extreme poverty and housing deficits.

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Just In: Nigeria received $5.85 billion capital inflows in Q1 2020 –NBS

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, compared to $8.51 billion in Q1 2019.

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Foreign Reserves Rise by $295m in One month

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, as against $8.51 billion in Q1 2019. This is according to the latest capital importation report released by the National Bureau of Statistics (NBS).

According to the NBS, the $5.85 billion worth of capital importation in Q1 2020 represents an increase of 53.97% when compared to how much was received in Q4 2019.

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However, when compared to the corresponding first quarter period of 2019, the figure indicates a 31.19% decline.

Capital Inflow by type

Portfolio investment ($4.31 billion) accounted for 73.61% of the total capital importation, followed by other investments ($1.33 billion), which accounted for 22.73%, and Foreign Direct Investment ($214.3 million), which accounted for 3.66% of total capital importation.

More details shortly…

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Naira set for recovery as ABCON issues guideline to members on forex sales resumption

It is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times.

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COVID-19 could save naira from depreciating further, Many odds against the naira, Naira forwards and parallel market crash puts pressure on official exchange rate, Naira appreciates to N386.94 to $1 at investor and exporters window. , Naira set for recovery as ABCON issues guideline to members for forex sales resumption

The Central Bank of Nigeria (CBN) and the Association of Bureau De Change Operators of Nigeria (ABCON) have finalized arrangements for the resumption of forex sales to Bureau De Change operators (BDCs).

Following this finalisation, the more than 5,000 BDCs spread across the country are now expected to help curb the downward spiral of the naira, thereby checking the activities of foreign currency speculators.

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Recall that the naira has recently been facing major challenges, no thanks to the COVID-19 pandemic. Unfortunately, currency speculators took advantage of the situation by making spurious demand for dollars with the hopes of making good returns from the rising gaps between official and parallel market rates.

Meanwhile, Governor Godwin Emefiele of the CBN and ABCON President, Aminu Gwadabe, have repeatedly spoken against the illicit business of currency speculators and the dangers they pose to the economy and naira’s stability. They have also warned the speculators about the looming danger for their trade if they refuse to retrace their steps; they Could incur losses estimated at over N10 billion in the next few months, especially now that the CBN is enabling BDCs’ full return to the forex market after nearly six weeks of inactivity.

(READ MORE: Devaluation’s drum beats louder)

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Governor Emefiele had also appealed to industrialists who patronize the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses. Failure to do this might result in them incurring the same huge losses as currency speculators.

Naira hits N570 to $1 at forwards market, pressure on the naira climbs up, Naira set for recovery as ABCON issues guideline to members for forex sales resumption   

Both Emefiele and Gwadabe have extensive experience in the market, enough to predict what follows after every major crisis. During the 2016 currency crisis, the market got a major relief after the BDCs began getting dollar allocations from the CBN. That same scenario will soon play out as the BDCs countdown to resumption.

In the meantime, it is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times. This is especially true now that the local currency has come under intense pressure, driven mainly by speculative demand for the dollar.

READ ALSO: CBN ends forex for fertilizer importation, raises concern over banks sharp practice

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Note that the BDCs are essentially operators who help to get dollars across to the end-users, no matter where they are. The BDC operators have, for decades, proven their relevance in stabilizing the naira. While commenting on the recent moves by the apex bank to resume dollar sales to the BDCs, Gwadabe said:

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The CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels as well as global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.

The naira has been exchanging at N461 to a dollar at the parallel market but will be upbeat once dollar sales to BDCs commence. The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators. It happened in 2016 and it will happen again in 2020. The return of the BDCs will immediately boost naira’s recovery and put the enemies of the economy to shame. We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable.”

(READ MORE: Naira depreciates at I&E window, forex turnover up by over 117%)

Naira crashes further at the parallel market due to dollar scarcity, lowest since 2017, Naira drops to N454, foreign investors and importers struggle for dollars, Naira set for recovery as ABCON issues guideline to members for forex sales resumption

Moving on, the CBN said it has taken steps to address the risks facing the naira. Asides other positive developments in the global economy (including oil price recovery thanks to OPEC+ output cuts and IMF’s $3.4 billion emergency funding to Nigeria), the CBN believes its measures will enable a rapid recovery for the local currency. Emefiele explained:

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CBN has also officially reviewed the naira exchange rate to N380 to a dollar. Aside devaluing the naira, the apex bank also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378, all aimed at attracting Foreign Portfolio Investment and strengthening the local currency. The BDC operators are expected to buy dollar from the CBN at N378 per dollar.”

For Gwadabe, the naira rate review and the CBN’s assurance to foreign investors on the easy repatriation of their funds from Nigeria, are positive indicators for naira’s continued recovery.

(READ MORE: Why the naira is falling)

He also noted that ABCON is reopening guidelines to all its members nationwide included on-boarding of the queuing crowd ticketing management application, known as ABCON 360°QSM portal, by all members. So far, over 80 percent of members registered nationwide.

He also disclosed that they updated all regulatory obligations during the lockdown, such as fumigation of members’ offices/markets, and distribution of second phase of face mask nationwide to our members. They also made provision for wash hand basins and sanitizers at distributions centres, even as members will explore school fees, mortgage, and subscription payments as part of their allowable scope post-COVID-19.

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