FBN Capital, the investment banking unit of FBN Holding has released its latest reading of manufacturing Purchasing Managers’ Index (PMI) for Nigeria which showed a decline to 49.2 in August from 50.6 posted the previous month.
According to FBN Capital, “GDP growth in Q2 2015 was lower than expected. It slowed to 2.4% y/y, the lowest rate since the start of the new rebased series in Q1 2011. The manufacturing sector contracted by -3.8%, compared to -0.7% in the previous quarter. (If we exclude the oil refining segment, the y/y contraction would have been flat on July.) The sector represented 11.5% of constant price GDP in Q2, and its largest segment is food, beverages and tobacco, which accounted for 4.3% of total GDP.”
It said the August report marked a drop in all sub-indices excluding delivery times.
“We view the steep decline for small sized companies, particularly for output and new orders, as a case of belatedly reflecting the squeezing of purchasing power and the broader slowdown in the economy,” it said.
“The readings for medium and large sized companies were marginally better, albeit from a low base in July. The macro challenges still prevail and business confidence remains low. The new government is yet to deliver on policy direction on manufacturing. The improvement in fuel supplies could well throw some light on the quicker delivery times.”
By Pita Ochai