Wednesday, May 3, 2023

Manufacturing activity rebounds in Nigeria as cash crisis eases

Nigeria’s manufacturing activity pulled off a sharp growth last month, shaking off successive contractions in the two months preceding April.

The growth was recorded as the squeeze resulting from the central bank’s push to wean Africa’s largest economy off dependence on physical cash softened.

The country’s Purchasing Manager Index (PMI) came in at 53.8 for the month on increased production level and improvement in new business, according to newly issued factory activity data.

A reading higher than 50 points to growth, while any below that threshold implies a shrinking in PMI, which assesses the overall direction that business condition in the manufacturing industry is headed.

Hiring was restrained and employment consequently slowed as companies still grappled with uncertainty in some way, following the crisis.

“The easing of the cash shortage challenge in April saw improvement in both output and consumer demand,” Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, said.

Stanbic IBTC Bank works alongside S&P Global and Nigeria’s statistics office every month to provide the data.

“While the easier access to cash caused business activities to expand across key sectors (Agriculture, manufacturing, services and wholesales and retails sectors), firms however maintained caution in increasing staff head count,” Mr Oni further stated.

His optimism for activity in the near term is measured, considering that sentiment remains relatively weak and given the signals that access to cash will be steady, not dramatic.

The document highlighted a steep jump in input costs for manufacturers in April, not altogether unanticipated as Nigeria’s inflation climbed to 22 per cent in the preceding month, closing in on its 18-year peak.

Even though firms passed on the increased cost to customers, that was done sensitively in order to attract them, leading to the slightest rate of selling price increase in three years.

“Business sentiment remained subdued in April, despite a slight pick-up from March. In fact, optimism was among the lowest seen since the survey began in January 2014,” the report said.

By Ronald Adamolekun, Premium Times

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