Growth in manufacturing, CBN forex interventions can converge exchange rates
New report by the Central Bank of Nigeria (CBN) on the Purchasing Managers Index (PMI) for the manufacturing sector has shown that it rose to 52.5 points in May from 51.1 points recorded the previous month. In the first quarter of 2017, the PMI reading was below 50 points.
This therefore means that the country’s manufacturing sector expanded for the second consecutive month in May owing to growth in production and new orders.
A PMI reading above 50 points indicates an expansion in the manufacturing/non-manufacturing sector, while readings below 50 points indicate a decline. A reading for 50 points indicates no change.
Analysts are currently divided on why the growth is sustained. Whereas some argue that the growth in manufacturing PMI can be attributed to the expansion in production, which rose for the third consecutive month to 58.7 points, and new orders, which rose for the second consecutive month to 50.5 points, others say it was due to the sustained injection of dollars to the market by the CBN,
Raw materials inventory and employment level also recorded growth, but supply deliver-time declined during the month under review.
However, a breakdown of the manufacturing PMI shows that 10 of the 16 subsectors reported growth in May in the following order: primary metal; petroleum & coal products; plastics & rubber products; paper products; electrical equipment.
Others sectors are: appliances & components; textile, apparel, leather & footwear; cement; and food, beverage & tobacco products and chemical & pharmaceutical products.
The remaining six sub-sectors declined in the following order: transportation equipment; nonmetallic mineral products; fabricated metal products; printing & related support activities; furniture & related products and computer & electronic products.
The non-manufacturing PMI grew to 52.7 points in May after 16 consecutive months of contraction. The expansion was supported by growth in business activity, new orders, employment level, and inventory.
Out of the 18 non-manufacturing sub-sectors, 10 sectors recorded growth in the following order: agriculture; transportation & warehousing; educational services; electricity, gas, steam & air conditioning supply.
Other sectors are: utilities; information & communication; water supply, sewage & waste management; accommodation & food services; health care & social assistance; and finance & insurance.
The remaining eight sub-sectors recorded contraction in the following order: construction; professional, scientific, & technical services; public administration; management of companies; arts, entertainment & recreation; real estate rental & leasing; repair, maintenance/washing of motor vehicles; and wholesale/retail trade.
