Economic analysts and industrialists have attributed the slight decline in the nation’s Manufacturing Purchasing Manager’s Index (PMI) to a combination of factors but more particularly to consumers’ low spending usually associated with post-festive seasons.
According to the report published by the Central Bank of Nigeria (CBN), the PMI, which stood at 59.0 Index points in January grew at a slower rate when compared to the 60.8 index points in December and 59.3 index points in the preceding month
As expected, production level, new orders, supplier delivery time, employment level and raw materials inventories also grew at slower rates in the month under review.
Commenting on the PMI slide, the Chief Executive Officer (CEO) of Montes Nigeria Limited, Dr. Godfrey Ogonna, said historically, January usually recorded slumps in manufacturing activities as consumers reduce their spending having spent so much in December.
The expert, who is also an economist, said manufacturers anticipated drop in demands in January and adjusted production to reduce glut.
Ogonna also linked the development to internal slowing activities of manufacturing companies whose many workers are usually on holidays from the end to December to the beginning of January.
He explained: “Some companies shut production from the end of December to resume production either the first or second week of January. This means that production volume and expectedly, the quantity of raw materials they need to produce will normally reduce. It has direct effect on the overall PMI compared to December when manufacturers expect spike in demand due to the festive season.”
Commenting, a university don, Mr. David Aku, said growth trajectory can be sustained if the CBN sustain its tempo of driving lending to the real sector.
He said the injection of over N2trn into the real sector through bank loans based on the loan to deposit ratio of 65 percent requirement might have impacted growth in the PMI.
According to him, the growth could cascade more if the real sector is supported more through fiscal policies.
The CBN reported further: “Of the 14 surveyed sub-sectors, 11 reported growth in the review month in the following order: petroleum & coal products; transportation equipment; paper products; furniture & related products; plastics & rubber products; primary metal; food, beverage & tobacco products; chemical & pharmaceutical products; fabricated metal products; textile, apparel, leather & footwear and cement. Electrical equipment sub-sector remained unchanged while printing & related support activities and Non-metallic mineral products recorded declines.”
On employment level the report said that the Index for the non-manufacturing sector stood at 58.9 points, indicating growth in employment for the 33rd consecutive month. Of the 17 surveyed sub-sectors, 14 recorded growth in employment level in the review period, 2 sub-sectors recorded no change while 1 sub-sector declined.
The PMI showed further that production level index stood at 59.6 points, showing growth for the 35th consecutive month in January, but a slower growth when compared to its level in December 2019.
According to the apex bank, nine of the 14 manufacturing sub-sectors recorded increased production level, three remained unchanged while two recorded decline.
The report reflected that Manufacturing sector inventories index grew for the 34th consecutive month in January 2020. At 60.7 points, the index grew at a slower rate when compared to its level in December 2019. Ten of the 14 sub-sectors recorded growth, 2 reported unchanged inventories while 2 reported lower raw material inventories in the review month.
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