Nigeria’s July PMI Rose To 48.8, Shows Economy Is Easing

Nigerian banks

According to the Stanbic IBTC Bank Nigeria July PMI data, Nigeria’s purchasing manager’s index rose to 48.8 in July and pointed to a fifth deterioration in business conditions in the past six months.

However, the PMI data is a slight improvement when compared to June’s reading which was a the survey-record low of 47.3. Stanbic IBTC noted in the report that the latest reading is ‘signalling that the overall rate of contraction had eased’.

The report said ‘Lower output was a key factor behind the private sector downturn. Though slower than in June, the rate of decline was marked and broadly in line with the average over the current six-month sequence of falls’

While many jobs were still being cut, Stanbic reported that employment ‘continued to rise in July. The rate of job creation accelerated to a six-month high’. In general, the report said ‘ total input prices rose at a slower rate in July. Currency weakness remained a factor behind higher costs (notably fuel), but anecdotal evidence suggested that its impact had waned. The increase in charges eased as a result, but was nevertheless marked overall.’

Commenting on July’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said: “The Stanbic IBTC Bank Nigeria PMI for July signalled a slower downturn in Nigeria’s business operating conditions by reaching 48.8 from a survey low of 47.3 in June. While the overall survey result suggests some improvement, it remains below 50 and implies that macroeconomic conditions are weak. Perhaps an explanation for the improved sentiment in consumer and business activity can be traced to the recent reforms implemented by authorities especially in the foreign exchange market.

He concluded that “Indeed, after a likely contraction in growth during the first half of the year, it is expected that recent reforms in the FX market aimed at attracting net capital inflows will finally be able to boost domestic investment and consequently growth. Although output and input prices rose at weakened rates in July, the rates of increase still remain elevated and suggest that headline inflation may continue to rise for a few more months.”

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.