As predicted, Nigeria’s economy is now in a recession. The economy has contracted twice in a roll.
Latest figures released by the CBN lay credence to this. The Purchasing Managers’ Index, PMI is a monthly calculation of all transactions carried out in the real sector of the economy in a given month. The survey carried in June recorded a response rate of 80.1 per cent, with a total of 1,562 responses received from a sample of 1,950 respondents.
For clarity purpose, a composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally declining.
Overall manufacturing PMI fell to 41.9 index points in June 2016, compared to 45.8 in the preceding month. The report further shows that only appliances & components and transportation equipment seems to be growing. Fourteen of the 16 sectors of the real sector witnessed a serious decline into negative territories.
A major cause of this downward trend is the forex crisis that paralysed manufacturing for over five months since the beginning of the year. The eventual take off of the single forex policy also came with its initial consequences. According to the Manufacturing Association of Nigeria, MAN manufactures lost about NGN348.6 billion to the new rate. Their letters of credit, LCs were submitted when the exchange rate was NGN197 to 1USD. Thousands of jobs have also been cut to shed weights across various sectors of the economy.
For Nigeria to get out of this contraction, it would take another quarter before an aggregated growth can show any growth.
To support manufacturers, the CBN has to ensure the new forex policy is allowed to operate without a policy somersault. To get out of a recession
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