Improved PMI signposts gradual recovery of businesses

Nigeria’s manufacturing Purchasing Managers’ Index (PMI), a gauge for manufacturing sentiments, has continued its upward monthly movement, signifying gradual recovery of business activities in the country’s manufacturing sector.

The PMI moved from 51.4 points in March to 53 points in April with improvement recorded for four out of the five sub-indices examined, according to data by FBN Quest and NOI. This was driven by activities in the cement industry which emerged a the winner during the COVID-19 pandemic.

“Cement has proved highly resilient in life with COVID-19. Accounting for 9.8 percent of constant price manufacturing output, its growth of 3.9 percent last year was the highest of all segments other than the 4.0 percent posted by a small player ( motor vehicles and assembly)” the report stated.

This was further affirmed by the first quarter financial statements of listed cement producers in Nigeria, where Dangote Cement and Lafarge Africa recorded sales growth of 22 percent and 41 percent respectively.

The report also suggests that the Federal Government’s action towards its infrastructure development programme paved the way for the cement industry to thrive.

Noting the Federal Government’s ambitious proposed plan to improve manufacturing share of GDP to 20 percent by 2023, which as at 2020 stood at 12.8 percent, they believe this is partly why the ministry of industry plans to finalise development strategies for the oil palm, clothing and textile sectors later this year.

Analysts at FBN Quest also assume that this decision was influenced by the success stories of East Asian countries where commercial agriculture provides raw materials for many manufacturing goods.

However, despite the upward movement of the PMI which is a forward-looking indicator of economic performance, analysts do not believe that it will impact the economic performance particularly for the first quarter of 2021.

The economy exited recession in the fourth quarter of 2020 after two- quarters of successive declines even though there was a contraction of 1.92 percent for the full year.