The manufacturing sector PMI declined from 58.3 points to 51.1 points between February and March 20201. The slowdown was triggered by reduced growth in 7 subsectors including electrical equipment, chemical and pharmaceutical products, primary metals and non-metallic mineral products. Similarly, the non-manufacturing PMI index declined to 49.2 percent, falling below the 50 percent threshold for the first time in over 2 years1. The overall contraction is due to the depression in global economic activity which has led to a reduction in new orders, inventory and consequently employment levels across the manufacturing and non-manufacturing sectors. In the coming months, the reduced activity across both sectors is expected to continue as a result of the decline in global demand for exports and the reduction in local consumption. In the meantime, some manufacturers can switch to producing essential commodities that are required to tackle the pandemic. In addition, the cash transfers by the government should be distributed to manufacturing and non-manufacturing workers that would be laid off or furloughed as a result of the pandemic.
April 20, 2020
Nigeria Economic Update (Issue 13)
OPEC Monthly oil report reveals that Nigeria recorded the highest month-on-month increase in crude oil production among the OPEC member countries in August 2017. Specifically, at an increasing rate of 8 percent, domestic oil production rose to pre-2016 level of 1.86 million barrels per day in August 2017. With ongoing repairs in the sector, oil production could get to 2.2 million barrels per day in the near term, albeit the prior voluntary agreement to cap production at 1.8 million barrels per day. Going forward, there is need to address poor planning and policy inconsistencies in the sector, in order to ensure the influx of investors who have channeled their investments to other African countries due to laxity in policies in the sector.
The Naira sustained its appreciation trajectory at the parallel market in the review week. Precisely, naira gained 13.3 percent (Week-on-Week) to exchange at N390/$ on March 24, 2017. Reduced pressure on the naira followed moderation in speculative activities as a result of increased forex sales and intervention by the CBN (daily intervention of $1.5 million at the interbank market.) The aim of CBN interventions (narrowing the gap between interbank and parallel market rates) seems to be on course with the continued appreciation of the naira at alternative markets. While current approach of the apex bank proves effective in improving international value of naira in the short term, however, it is expedient that the bank articulates clear and credible flexible exchange rate policy to sustain the momentum and enhance confidence in the forex market in the medium term. Nonetheless, the sustainability of the exchange rate gains is partly dependent on the prospect of crude oil price and production which is outside the purview of the monetary authorities.