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Economy & Politics

Nigeria to post bigger contraction in Q3, as PMI deeps further

Scarcity of dollar, depressed oil prices and limited fiscal support to contract economy further.

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PMI

Nigeria’s Manufacturing sector is expected to witness further contraction by the end of third quarter and end of 2020, as the manufacturing Purchasing Manager’s Index (PMI) contracted consistently in the last four months.

According to the latest data released by the Central Bank of Nigeria, manufacturing PMI stood at 48.5 index points, against 44.9 points recorded in July, 2020.

Back story: On Wednesday, Nairametrics reported that out of the 14 subsectors surveyed, 6 subsectors reported expansion (above 50% threshold) in the review month in the following order:

* Non-metallic mineral products
* Cement
* Plastics & rubber products
* Transportation Equipment
* Chemical & pharmaceutical products
* Textile, apparel, leather & footwear.

READ: Startimes, DStv, Others adjust prices as Nigerian businesses battle tough economic conditions

The remaining 8 subsectors reported contraction in the following order:

* Printing & related support activities
* Electrical equipment
* Petroleum & coal products
* Primary metal
* Furniture & related products
* Paper products
* Food, beverage & tobacco products
* Fabricated metal products

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

READ: A Sterling performance? Not quite, but commendable

PMI for non-manufacturing

Meanwhile, the composite PMI for the non-manufacturing sector stood at stood at 44.7 points in August 2020, indicating contraction in non-manufacturing activities for the fifth consecutive months.

Out of the 17 surveyed sub-sectors, only the utilities subsector reported same level, while the remaining 16 subsectors reported contracted in the following order:

* Repair,

* Maintenance/washing of motor vehicles;

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* Real estate rental & leasing; professional,

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* Scientific, & technical services;

* Management of companies;

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* Electricity, gas, steam & air conditioning supply;

* Educational services;

* Health care & social assistance;

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* Finance & insurance; construction;

* Arts, entertainment & recreation;

*Transportation & warehousing;

* Accommodation & food services;

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* Water supply, sewage & waste management;

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* Wholesale/retail trade; agriculture and Information & communication.

READ: Is Forex trading legal in Nigeria?

What this means

PMI is a survey that is conducted by the Statistics Department of the Central Bank of Nigeria to show the changes in the level of business activities in the current month compared with the preceding month.

For each of the indicators measured, this report shows the diffusion index of the responses, which is computed as the percentage of responded 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 fourth consecutive months implies that Nigeria may post a bigger than expected contraction in the third and fourth quarters of 2020.

Managing Partner, FA Consult, an audit firm and a chartered accountant, Peter Adebayo, said:

The economy would witness further decline in the second half of the year, even till first quarter of 2021. I expect the scarcity of dollar, depressed oil prices and limited fiscal support to put pressure on the economy.”

In all, as key sectors continue to suffer contraction, unemployment may surge in the economy.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]cs.com.

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Economy & Politics

Senate endorses ex-Service Chiefs as Non-career Ambassadors

The Senate has confirmed President Buhari’s nomination of the immediate past service chiefs as non-career ambassadors.

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The Nigerian Senate has endorsed the nomination of the past serving Military Service Chiefs as Non-career Ambassadors.

This was confirmed during Tuesday’s plenary session and announced in a social media statement by the Nigerian Senate.

Their confirmation follows the consideration of the report of the Senate Committee on Foreign Affairs, Chaired by Senator Adamu Bulkachuwa.

According to reports, the Senate Minority Leader Enyinaya Abaribe, however, questioned the nomination and confirmation of the ex-service chiefs when the Senate had on 3 different occasions called for their sack.

Senator Abaribe also raised issues on the petitions against the former service chiefs and questioned why they were dismissed without explanations.

But Senate President Ahmad Lawan dismissed Senator Abaribe’s concerns, ruling that the nomination of the former service chiefs cannot be nullified simply because the upper chamber had called for their sack, noting that this is totally a different assignment.

In his concluding statement, the Senate President, Senator Lawan added that these nominees that have just been confirmed have served this country to the best of their abilities. He appealed to the executive to make sure they use their experience as military men to the best.

“These nominees that we have just confirmed are nominees that have served this country to the best of their ability. Our appeal to the Executive is to make sure they use their experiences as military men to the best,” Lawan said.

Lawan, on behalf of the senate, wished them a very successful career in their capacity as Non-Career Ambassadors.

What you should know 

  • Recall Nairametrics reported earlier this month that President Muhammadu Buhari nominated ex-Service Chiefs for Senate approval as non-career Ambassadors-Designate.
  • Their appointment came barely a week after their retirement as service chiefs and their replacement with new ones.
  • This led to a spate of criticisms from some Nigerians who felt that the nation’s security situation got worse under their watch.
  • They were reported to have tendered their resignation from their positions amid heightened calls that they should be sacked due to the increasing rate of insecurity across the country.

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Economy & Politics

2020 budget performance: FG achieves 89% capital release in December 2020

The Minister of Finance has revealed that the FG achieved 89% release of the capital component of the 2020 budget to MDAs as of December 2020.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed, has revealed that the Federal Government achieved 89% release of the capital component of the 2020 budget to Ministries, Departments and Agencies (MDAs) as of December 2020.

She said that the 89% capital funding for MDAs was achieved with the release of N1.74 trillion.

According to a report by the News Agency of Nigeria (NAN), this disclosure was made by Ahmed at an interactive session with the leadership of the National Assembly on Monday, February 22, 2021.

She also revealed that the government had disbursed N118.37 billion for Covid-19 capital expenditure from the fund.

READ: Recession: Senate attributes recovery to it’s cordial relationship with Executive

What the Minister for Finance is saying

Ahmed said the Nigerian economy faced serious challenges in 2020, with the macroeconomic environment significantly disrupted by the Covid-19 pandemic.

She said this led to a 65% drop in projected net 2020 government revenues from the oil and gas sector, which adversely affected foreign exchange inflows into the economy.

On the delayed release of funds to implement the 2020 capital budget until March 31, the Minister said the complaint had decreased.

She said, “I think the complaint was earlier in the year when we were trying to transfer the balances. As far as I know, in the past three weeks, I haven’t heard any such complaints and we have been able to address them.

“But when we started the transfers, we couldn’t transfer to some agencies because of some limitations in the system, but we have since been able to transfer the capital component that is being utilised by the agencies budget to the system.

READ: Nigeria receives $9.68 billion capital inflows in 2020, lowest in 4 years

While pointing out that the implementation of the MDAs projects was tied to procurement processes and capacity of the MDA, Ahmed also said the extension of the 2020 capital budget implementation to March 31 had recorded 30% performance as at January.

However, Ahmed said that she expected that the extension would record 100% performance in March.

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Speaking during the interaction, the Senate’s Chief Whip, Senator Orji-Uzor Kalu, commended the Minister on the capital performance of the 2020 budget.

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READ: FG to reopen Kano and Port Harcourt airports for international flights

He said, “I want to commend the minister and her team because this is the first time in the history of Nigeria that by December 31, we are having 89% performance expenditure of the budget. It has never happened before; Last year was the very first.

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“The budget had been going 49%, 27%; this means from what the Senate President was asking, it means by March, we should be looking at implementing the budget 100%.’

Earlier, President of the Senate, Ahmad Lawan said the meeting was to get an update on the capital implementation of the 2020 budget given its extension for implementation by the national assembly to March 31.

What this means

  • The 89% capital release for the 2020 budget as of December 2020 is quite encouraging as it occurred despite the economic challenges and disruption caused by the outbreak of the coronavirus pandemic.
  • There seems to be an improved effort by the Federal Government at the budgeting process with the early passage of the 2021 budget and the implementation of the capital component of the 2020 budget.

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