The Nigerian economy has demonstrated a significant turnaround in August 2024, as evidenced by the rise in the Purchasing Managers’ Index (PMI) to 50.2 index points. This marks the first expansion in business activities since July 2023, signaling a potential end to a prolonged period of economic contraction.
The Central Bank of Nigeria (CBN) released the PMI survey report, revealing that the expansion was primarily driven by the services and agricultural sectors. The services sector recorded its third consecutive month of growth, while the agricultural sector expanded for the first time in over a year. Even though the industry sector continued to contract, the rate of contraction slowed compared to the previous month.
Key Indicators Show Positive Signs
Several key indicators, including output, new orders, and stock of raw materials, exhibited positive movements. The output index reached 50.8 points, indicating growth in production levels for the second consecutive month. New orders also expanded, reaching 50.5 points, suggesting increased demand for goods and services. The stock of raw materials increased to 51.3 points, indicating improved inventory levels.
Employment and Suppliers’ Delivery Time Remain Challenging
Despite these positive developments, employment figures remained a concern, registering a decline at 48.7 points. This suggests that businesses may be hesitant to hire new staff or may be facing challenges that necessitate layoffs. Additionally, suppliers’ delivery time remained unchanged at 50.0 points, indicating no significant changes in the time it takes for suppliers to deliver materials and components.
Analysis of Sub-Sectors
A detailed analysis of the 36 sub-sectors surveyed across industry, services, and agriculture revealed that 17 sub-sectors reported growth, while 19 sub-sectors experienced a decline. The primary metal subsector led the way with the highest growth, while forestry reported the sharpest drop.
Industry Sector Shows Signs of Recovery
The industry sector PMI stood at 49.2 points, marking the seventh consecutive month of contraction. However, this figure represents an improvement from the contractionary position observed since March 2024. This suggests that while the sector continues to experience contraction, there has been a gradual recovery in industrial activities over the past few months.
Manufacturing Sector Remains Challenged
Within the industry sector, the manufacturing subsector declined in August 2024. Among the 17 subsectors surveyed, nine recorded contractions, while the remaining eight indicated expansion. The subsector with the highest contraction was transportation equipment, whereas primary metal recorded the highest expansion.
If You Ask Me
The August 2024 PMI data offers a glimmer of hope for Nigeria’s economy, indicating a potential turnaround after a prolonged period of contraction. While challenges remain, particularly in the employment and manufacturing sectors, the overall positive trends in output, new orders, and stock of raw materials suggest that the economy is gradually recovering.
However, on the contrary, the latest Stanbic IBTC Bank Purchasing Managers Index (PMI) released on Monday indicate that the headline PMI remained below the 50.0 no-change mark, signaling a stagnation in overall operating conditions. The report ranked PMI 49.9 in August from 49.2 in July
Also the Stannic reports an increase in employment levels in August noting that the latest rise in staffing levels was the fastest since last November, although modest, while the CBN reports otherwise.
Despite the reports of both bodies, it is important to note that sustained economic growth will require continued policy measures to address underlying challenges, such as infrastructure development, job creation, and increased investment. The positive signs evident in the PMI data provide a foundation for future economic progress, but it is essential to remain vigilant and implement appropriate strategies to ensure long-term sustainability.
