Nigeria: PMI edges up in October but remains entrenched in contractionary territory
November 3, 2016
In October, the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) rose to 47.5 from September’s 46.8. Despite the increase, the index remains below the 50-threshold that separates contraction from expansion in business conditions.
October’s reading reflects another sharp contraction in the Nigerian private sector, driven by a drop in output and new orders. The monthly reading, however, points to a less pessimistic outlook in the near-term. Output decreased at a sharper rate owing to falling client demand and the inability of firms to purchase inputs due to rising costs. The drop in new orders eased in October as domestic sales increased notably. Employment at Nigerian firms increased for the first time in three months. Declining new orders coupled with higher staffing enabled Nigerian firms to work through backlogs of work. Regarding price development, input costs and output prices rose notably, albeit at a softer pace.
Commenting on the result, IHS Markit analyst Ayomide Mejabi added that, “although the recent PMI reading potentially indicates a more positive near-term outlook, such an optimistic outcome is unlikely to be sustainably anchored unless the pace of restoring policy credibility picks up”.