Data from the National Bureau of Statistics (NBS) disclosed that the business activity in Nigeria’s manufacturing sector expanded at a stronger pace, with the Purchasing Manager Index (PMI) coming in at 58.2 index points in October compared to 57.7 in the prior month. This indicates a stronger improvement in the health of the goods-producing sector.
The rise in the manufacturing PMI reflects the scale-up in production (+0.8 m/m) and employment (+0.2 m/m) levels, driven by a rise in order levels (+0.7 m/m) and quantities purchased (+3.0 m/m). The acceleration in order levels was due largely to domestic orders, as export orders contracted for the 56th consecutive month.
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Similar to the manufacturing sector, the Non-Manufacturing PMI improved slightly to 58.2 index points in October from 58.0 in September, due largely to faster growth in business activity (+0.7 m/m), new orders (+0.1 m/m) and inventories (+0.7 m/m).
In a nutshell, stronger domestic demand propelled growth in Nigeria’s economy, in the review period. Overall, firms stepped up their inputs stock build-up and staff strength while supply chains responded marginally faster to the increase in local demand. We believe the surge in domestic demand is a ripple effect of the total border closure which the government implemented earlier in the month.
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The uptick in local demand, in addition to the restriction of supply through the land borders, has also put upward pressure on output prices (+0.6 m/m). If this persists, inflationary pressures can intensify in the short term. These signs of renewed inflationary pressures indicate that we are not likely to see the CBN ease its monetary policy stance anytime soon.
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