2023: Nigeria’s manufacturing activity climbs again in June, business confidence ebbs

Nigeria lengthened the run of growth in its factory output to three months in a row in June as manufacturers raced to increase goods in stock to beat potential spikes in inflation.

According to Stanbic IBTC Bank Nigeria PMI issued on Monday, an end to a popular but expensive fuel subsidy scheme in Africa’s biggest economy recently caused price pressures to quicken last month, slowing the pace of rise in new orders.

At 53.2, the headline Purchasing Manager Index

(PMI) – an indicator of the performance and business conditions of private sector manufacturing firms – is weaker when set beside May’s 54.0.
Nevertheless, it points to growth.

A PMI reading above 50 means expansion, while any below that point shows deterioration.

“Input prices increased at the fastest pace since Aug 22, while the rate of selling price inflation accelerated sharply as firms passed higher costs on to their customers,” said Muyiwa Oni, team lead for Equity Research West Africa at Stanbic IBTC Bank.

The lender partners with Nigeria’s statistics agency to prepare the monthly survey with support from New York-based market intelligence firm S&P Global.

An older PMI survey, started by the Central Bank of Nigeria (CBN) in 2015, ran aground in December 2020, with no issue published ever since.

Business confidence for June sank to the second-lowest level since the record began. Yet, the outlook is upbeat for the short term, premised on the expectation that investment, projected market drives and business growth plans will boost output.

The most closely watched business surveys worldwide, PMIs are favoured by financial markets, economists as well as business decision-makers.

The newly released data will likely guide Nigeria’s monetary authority when the committee assembles next to decide the rate in an economy where price levels are pushing near their peak since September 2005.

On Monday, Bloomberg cited Tatonga Rusike, Bank of America’s economist for sub-Saharan Africa, as saying the country may have to raise rates by a minimum of 700 basis points by December to stand a chance of reining inflation in.

His expectation is that inflation could touch 30 per cent by year-end from the current 22.4 per cent on the heels of the abolition of petrol subsidies and a 40 per cent weakening of the naira in June.