Nigeria’s economy seen coming out of recession as manufacturing index expand for the fourth consecutive month

The manufacturing purchasing managers’ index (PMI), an indicator of the economic health of the manufacturing sector increased to 54.1 index points in July from 52.9 in June 2017, indicating expansion in the manufacturing sector for the fourth consecutive month, a Central Bank of Nigeria (CBN) PMI report for the same month just released has shown.

The index report is a familiar data released at the start of the calendar month in developed markets (such as the ISM’s in the US), the larger emerging markets such as China and a few other frontiers. It is based upon the responses of manufacturers to set questions on core variables in their businesses.

Emefiele Godwin, CBN Governor and Kemi Adeosun, Nigeria’s Finance Minister

The CBN report indicated that 11 of the 16 subsectors reported growth in the review month in the following order: appliances & components; computer & electronic products; cement; primary metal; chemical & pharmaceutical products; food, beverage & tobacco products; textile, apparel, leather & footwear; printing & related support activities; paper products; electrical equipment and transportation equipment.

The remaining five subsectors declined in the order: petroleum & coal products; fabricated metal products; furniture & related products; nonmetallic mineral products and plastics & rubber products.

Specifically, production level index for the manufacturing sector is reported to have grown for the fifth consecutive month in July 2017. The index at 59.3 points indicated an expansion in production at a faster rate when compared to the level recorded in the previous month of June.

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Fourteen of the sixteen manufacturing sub-sectors recorded expansion in production level during the review month with new orders index at 52.7 points, growing for the fourth consecutive month. Eight subsectors reported growth; one remained unchanged while the remaining seven declined in the review month.

Manufacturing employment level index equally grew in the month under review. At 51.8 points, the index indicated a growth in employment level for the third consecutive month. Of the sixteen subsectors, eight recorded growth, three sub-sectors remained unchanged while the remaining five sub-sectors recorded decline in employment level.

At 53.6 points, the raw materials inventory index grew for the fourth consecutive month, and at a faster rate compared to its level in June 2017. Eleven of the sixteen sub sectors recorded growth; two recorded no change while three sub-sectors recorded decline in raw materials inventory.

The PMI expansion for the past four months points, according to analysts, is a clear indication that the economy is finally emerging from recession.

In Q1 2017 its contraction narrowed from -1.7 percent year-on-year in the previous quarter to -0.5 percent with manufacturing posting positive growth of 1.4 percent year-on-year, the first since Q3 2015.

To this end, analysts at FBNQuest see a recovery in GDP growth to 1.6 percent year-on-year in Q2 2017.

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