Nigeria: PMI inches up from record low but remains stuck in contractionary territory
October 5, 2016
In September, the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) rose to 46.8, inching up from August’s record low of 46.3. Despite this minor improvement, the reading still represented the second-worst result in the survey’s history and the index remained firmly below the 50-threshold that separates contraction from expansion in business conditions.
September’s subdued reading reflected that output, new orders (including new export orders), employment and purchasing activity all continued to contract. In fact, output fell for the eighth consecutive month in a climate of weak demand. However, new orders declined at a softer pace than in September, driving the slight advance in the overall PMI. Concerning price developments, input prices rose mainly because an uptick in fuel and raw material prices drove up purchasing costs. Firms increased output charges considerably to pass on rising costs to clients.
Commenting on the result, IHS Markit analyst Ayomide Mejabi added that, “the PMI suggests that economic activity may have worsened in the third quarter of the year […]. This worsening in business conditions in the third quarter occurred despite the introduction of reforms in the foreign exchange market aimed at improving the supply of foreign exchange in order to bolster domestic investment and consequently improve economic growth. The continued downturn in private sector activity as suggested by the PMI may be due to the fact that discovering USD/NGN prices in the interbank market remains inefficient and may be limiting the pace and size of foreign portfolio inflows. In addition, the output prices index suggests that the underlying pressure on prices may be waning which could result in the pace of growth in headline inflation slowing.”