Calls heighten on vigorous im­ple­men­ta­tion of eco­nomic sus­tain­abil­ity plan

... as PMI slides to 41.1%

Business Day (Nigeria) - - NEWS - CYN­THIA EGBOBOH, Abuja

Eco­nomic ex­perts have charged the Nige­rian govern­ment on need to ur­gently and vig­or­ously im­ple­ment its sus­tain­abil­ity plans to spur eco­nomic ac­tiv­i­ties and save the ail­ing econ­omy from deeper woes. This is es­pe­cially as the Pur­chas­ing Man­agers’ In­dex (PMI) slumps fur­ther to 41.1 per­cent.

The PMI, which mea­sures the pre­vail­ing di­rec­tion of eco­nomic trends in the man­u­fac­tur­ing and ser­vices sec­tors, has recorded a steady de­cline in five con­sec­u­tive months from 60.8 per­cent in De­cem­ber 2019 to 41.1 per­cent in June 2020.

The PMI has been largely af­fected by the lock­down of both the lo­cal and global econ­omy to cur­tail the spread of the COVID-19 pan­demic, and ac­cord­ing to ex­perts it is ex­pected to de­cline fur­ther in pre­ced­ing months ex­cept strict ef­forts are made to im­ple­ment poli­cies and plans that can boost econ­omy ac­tiv­i­ties.

The Mon­e­tary Pol­icy Com­mit­tee of the CBN, at its monthly meet­ing held in July, noted the grad­ual, but per­sis­tent de­cline in the Man­u­fac­tur­ing and non-Man­u­fac­tur­ing Pur­chas­ing Man­ager’s In­dices be­low the bench­mark.

The Man­u­fac­tur­ing PMI de­clined to 41.1 in­dex points in June 2020 from 42.4 in­dex points in May 2020. Con­versely though, the non-man­u­fac­tur­ing PMI im­proved to 35.7 in­dex points in June 2020 from 25.3 in­dex points in May 2020.

The Com­mit­tee at­trib­uted the trend in the Man­u­fac­tur­ing and non-man­u­fac­tur­ing PMI to slower growth in pro­duc­tion lev­els; new do­mes­tic or­ders; em­ploy­ment rate; raw ma­te­ri­als sup­ply, and new ex­port or­ders.

John­son Chukwu, CEO, Cowry As­set Man­age­ment, in an in­ter­view with Busi­ness­day says there is an ur­gent need for the govern­ment to de­velop and im­ple­ment eco­nomic poli­cies to boost the na­tion’s econ­omy as well as pur­chas­ing power of the cit­i­zens.

Chukwu notes that the con­trac­tion in PMI speaks to the level of con­fi­dence on the econ­omy of the coun­try, which has re­mained weak as the im­pact of the Covid-19 pan­demic rubs off on all sec­tors.

“As it stands to­day, we may be ex­pect­ing con­sump­tion to fur­ther de­cline, and if the man­u­fac­tur­ers per­ceive a con­tin­u­ous de­cline, they may not be en­cour­aged to pro­duce,” he states.

Apart from the eco­nomic sus­tain­abil­ity plan, there is need to de­velop and en­sure im­ple­men­ta­tion of spe­cific poli­cies to ad­dress is­sues re­lat­ing to the dif­fer­ent sec­tors, he notes.

“Like the sur­vival fund, if they can be­gin an early im­ple­men­ta­tion of the fund, it will go a long way in sta­bil­is­ing the econ­omy.

“While we cel­e­brate the CBN N50 bil­lion fund for MSMES, there is need to en­sure that more re­sources

are chan­nelled to them from time to time to cre­ate a sus­tained growth, stim­u­late and en­cour­age them to pro­duce more, so as to mod­er­ate fur­ther de­cline,” he ad­vises.

Also speak­ing with Busi­ness­day, Aliu Has­san, an Abuja-based econ­o­mist, says Nige­ria may face deeper con­trac­tion in pre­ced­ing quar­ters of 2020, as PMI drops be­low 50 per­cent for the sec­ond con­sec­u­tive months amid eco­nomic un­cer­tainty.

“With Nige­ria hav­ing PMI fig­ure be­low 50 for the sec­ond con­sec­u­tive months shows that there may be more de­cline in the re­main­ing quar­ters of 2020. The global econ­omy is still shak­ing, hence the need for more de­lib­er­ate ef­forts to en­sure eco­nomic sta­bil­ity in Nige­ria,” Has­san states.

As the man­u­fac­tur­ing in­dex recorded a de­cline, pro­duc­tion level, new or­ders, em­ploy­ment level, and raw ma­te­rial in­ven­to­ries all recorded fur­ther de­cline com­pared to their May 2020 fig­ures.

Has­san stresses that as key sec­tors con­tinue to record de­clines, there may be in­crease in un­em­ploy­ment rate, busi­nesses may be forced to lay off work­ers in or­der to keep up with pro­duc­tion cost cou­pled with poor de­mand.

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