Nigeria: Severe economic imbalances continue to weigh on PMI in February
March 3, 2016
In February, the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) fell from January’s 51.3 to 47.9. The print marked the lowest reading since April 2015. As a result of February’s fall, the indicator dipped below the 50-threshold that separates contraction from expansion in business conditions.
February’s deterioration reflected falls in output and new orders. According to an economist at Stanbic IBTC Bank, “the February PMI reading suggests a broad-based decline in business conditions symptomatic of the challenging macroeconomic conditions as well as the extremely volatile exchange rate on the parallel market. The seasonally adjusted PMI reading of 47.9 represents the first contraction in over two years and certainly suggests that the level of economic activity may be weakening as disposable income reduces and access to foreign exchange for import activity remains challenged. The parallel market appears to reflect where the FX supply-demand imbalance is pricing USD/NGN, and as such is feeding through to input and output prices. Certainly, the sharp rise in purchase prices can be linked to the widening spread between the official exchange rate (199) and the parallel market rate (315) as at the end of February. In fact, prior to February, businesses had resisted passing on the full input price increases to the final consumer.”