ECONOMY: Nigeria’s Manufacturing Index Rises on Increase Demand as Employment Surges; FG Proposes USD22.7 billion Borrowings…

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Recently released Purchasing Managers’ Index (PMI) survey report by Central Bank of Nigeria (CBN) showed faster expansions in both manufacturing and non-manufacturing
businesses in November 2019 as production level and demand indices grew faster.

According to the survey, the manufacturing composite PMI expanded faster to 59.3 index points in November (from 58.2 in October), the fifteenth consecutive
expansion.

Specifically, the growth in
manufacturing composite PMI was due to faster expansion in production level index to 60.1 in November 2019 (from 59.3 in October 2019) which was propelled by expansion in new orders – the index rose marginally to 59.4 in November 2019 (from 57.9 in October 2019).

Producers were equally favoured as they were able to pass on costs to customers in order to protect their margins – selling prices rose faster (output price index rose to 53.1 from 52.5) while costs of production expanded faster (input price index fell to 59.3 from 58.4).

Suppliers of raw materials improved on delivery time of input materials despite increased production level – supplier delivery time index rose to 58.7 in November (from 58.6 in October).

Amid improvement at the suppliers’ end, raw materials/work-in-progress expanded faster, to 60.6 from 58.6 as the producers increased their quantity of raw materials purchased – quantity of purchases index expanded faster, to 55.8 from 53.7.

Despite the increase in selling prices, we saw stock of finished goods flattish – its index expanded stood at 53.1 in November 2019 – as consumers absorbed the increased costs from the producers.

Number of new hires recorded by manufacturers increased in tandem with the higher production volume – the index for employment rose to 57.7 points in November 2019 (compared to 56.8 in October 2019).

Of the fourteen manufacturing sub-sectors surveyed, thirteen sub-sectors (or 92.86%) recorded faster expansions, sustaining the same performance it printed in October 2019.

Particularly, manufacturers of ‘Transportation equipment’, ‘Furniture & related products’ and ‘Plastics & rubber products’ registered the sharpest expansion in activities of 75.0 (from 51.3), 67.5 (from 66.3) and 62.4 (from 53.0) respectively.

Similarly, the non-manufacturing sector recorded growth as its composite PMI expanded faster to 60.1 index points in November 2019 (from 58.2 index points in October 2019), the fourteenth consecutive expansion.

This was driven by faster expansion in business activity and incoming business to 60.0 (from 57.9) and 58.5 (from 60.7) respectively.

Business activity expanded despite average price of inputs which expanded faster to, 54.6 index points in November 2019 (52.2 index points in October 2019); however, service providers still stockpiled as inventories rose to, 65.1 (from 59.2).

Also, employment expanded faster to 58.4 (from 57.1) amid increase in incoming business.

Of the seventeen manufacturing sub-sectors surveyed, six sub-sectors (or 35.29%) recorded faster expansions, recording a flattish performance.

Notably, service providers of ‘Finance & Insurance’, ‘Wholesale/Retail Trade’ and ‘Educational Services’ registered the sharpest expansion in activities of 62.8 (from 59.7), 62.4 (from 58.9) and 61.9 (from 57.9) respectively.

Meanwhile, the Federal Government reached out to the National Assembly to approve the proposed foreign borrowings of USD22.7 billion it hopes to address the infrastructural deficit in Nigeria.

The Debt Management Office (DMO), stated that the proposed loans which would be semi-concessional and long-tenured would be expended strictly on infrastructure and other developmental social projects with a multiplier effects on employment and GDP.

We expect FG to explore cost savings option of private capital, using the right policies to attract them, instead of its proposed borrowing which appears to be more expensive (debt servicing to FG’s revenue ratio was 48% in H1 2019), to speedily bridge the gap of infrastructure deficit which impedes Nigeria’s capacity to compete with other

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