Nigerian manufacturing activity is stronger in November, but confidence hits a record low

Nigeria purchasing manager index (PMI), which gauges the overall health of the manufacturing sector, including the direction it’s headed, saw a further improvement in November as demand for goods increased and the number of people ordering them increased similarly.

The PMI reading for Africa’s largest economy rose to 54.3 in the past month from 53.6 the previous month, the Stanbic IBTC Bank Nigeria PMI released on Thursday showed.

It was the fastest pace at which factory activity has improved since April.

A reading below 50 points to a contraction, while above the threshold indicates an advance in activity.

The Central Bank of Nigeria had been publishing its own version of the PMI without fail since January 2015 until it abruptly stopped in December 2020.

PMIs are released monthly before official economic data and are known to be the most followed business surveys by central banks, policy makers in the real sector as well as financial markets.

“Despite high raw material costs putting pressure on companies, companies can maintain production levels somewhat by passing the cost on to consumers,” said Muyiwa Oni, Equity Research West Africa team leader in Stanbic IBTC Bank.

Manufacturers have to pass costs on to consumers as Nigeria’s challenging inflation, now at a 17-year high, fuels operating spending and weakens the margin.

Godwin Emefiele, the head of the main bank, says his policy team will continue to raise rates until inflation pressure eases.

ALSO READ: Does Manufacturing Matter to the Nigerian Economy?, by Uddin Ifeanyi

The committee raised rates for the fourth straight time last month, one of the longest rate binding cycles in 11 years.

The PMI survey found that business confidence sank to its lowest point since recording began about nine years ago.

“High inflation and aggressive monetary policy tightening could dampen growth prospects in the near term,” Oni said.

“We now revise our respective growth forecasts for 2022 and 2023 to 2.8% y/y and 3% y/y, from 3.2% y/y and 3.3% y/y,” it added.

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