The manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) for the month of October showed a slowing contraction relative to previous months, making it the 7th consecutive month both indices have been below the 50-index point benchmark.1 Manufacturing PMI increased from 46.9 index points to 49.4 index points while non-manufacturing increased from 41.9 index points to 46.8 index points, but still below the 50-index point benchmark. However, 6 out of 14 subsectors in the manufacturing sector recorded an expansion relative to the previous month. In the non-manufacturing sector, only 3 out of the 7 sub sectors recorded growth relative to the previous month. Production is expected to improve significantly as the economy rebounds and the festive season approaches, thus both manufacturing and non-manufacturing PMI are expected to advance towards the 50-index point benchmark. However, the increase in PMI, as a result of increased demand, is likely to be associated with rising inflation. As such, the Central Bank of Nigeria (CBN) should increase efforts towards addressing the rapid increase in the price of commodities.
December 14, 2020
Nigeria Economic Update (Issue 44)
Recent ranking by the World Bank, portrayed Nigeria as having a poor business environment based on the ease of doing business in 2016. Although, Nigeria moved one position forward from previous (2015) ranking, to attain the 169th position out of the 190 global economies reviewed4. This poor rating is resultant of a myriad of factors, including: difficulties in starting a business, enforcing contracts, inaccessibility to credit, tax payment issues, as well as unreliable supply of energy, and labour market regulations. Going forward, improving the efficiency of tax administration by adopting the latest technology to facilitate the preparation, filling and payment of taxes will be beneficial for the business community.
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.
Nigerias domestic crude production increased significantly in April 2017. OPECs Month-on-Month data shows a 22.6 percent increase to 1.5 million barrels per day constituting the biggest increase among oil producing group. Crude production increased at the backdrop of completion of scheduled maintenance/repairs at the Bonga oil field, implying resumption of crude production by an additional 225,000 barrels. Remarkably, Nigeria is progressively moving towards meeting daily output benchmark/target (2.2 million barrels per day). Given recent boost in domestic crude oil production, considerable effort should be made to improve the countrys refining capacity in order to reduce fuel importation and conserve foreign exchange.