Nigeria’s Purchasing Index Hits Record Low On Dollar Supply, Power


The country’s Purchasing Managers’ Index (PMI) has weakened to a record low of 45.5 in the month of February from the 47.2 in January for manufacturing sector, and equally slowed to 44.3 in February, down from 46.9 in January for the non-manufacturing sector.

Analysts attributed the reason to the fact that manufacturers now have little access to power and dollar to import raw materials.

“The Central Bank of Nigeria (CBN), last week, released its Purchasing Managers’ Index (PMI) Report for February 2016, which captures the PMI for both the manufacturing and non-manufacturing sectors.

“Both sectors’ PMIs dropped sharply to 45.5 (previously 47.2) and 44.3 (previously 46.9) respectively for the second consecutive month,” analysts at Cordros Capital said.

They also said that it is worthy of note that the below 50 PMI results recorded year-to-date suggest that economic activities have generally slowed down since December 2015 (where 51.2 and 53.4 manufacturing and non-manufacturing PMIs were recorded).

“This, in our view, is a pointer to a slower gross domestic product (GDP) growth in the first quarter of this year. It is also in line with the view already hinted by the Monetary Policy Committee (MPC) at the January 2016 meeting that   “growth in the first quarter of 2016 is expected to be less robust than in the corresponding period of 2015 (first quarter GDP of 3.96 per cent) and therefore adds to pressure on the committee to provide further decisive policy support at this month’s meeting,” they said.

The 45.5 manufacturing PMI in February is at a record low level (since the CBN commenced the survey in January 2015). All the sector’s five diffusion indices, save the supplier delivery time index which improved, declined.

“This, in our view, underscores the heightened challenges faced by manufacturers in accessing foreign exchange for their operations and the significant drop in electricity power generation and supply in the month of February. With regards to access to the dollar to fund raw materials and other input requirements, we note particularly, the feedback from our enquiries with leading FMCG companies on the Nigerian Stock Exchange, wherein the generally held view is that dollar supply from the CBN has fallen to below 50 per cent of their operational requirements,” the analysts at Cordros Capital said.

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