CBN’s Nigeria PMI: A Rising Tide Lift All Boats.

31/10/2018/Cordros Report

Nigeria’s business landscape, in the last quarter of 2018, is off to a great start, as CBN’s monthly Purchasing Managers’ Index (PMI) – the first report in Q4-18 – sustained its expansionary trajectory for the nineteenth consecutive month in October. Precisely, both the manufacturing and non-manufacturing PMIs expanded at a faster pace compared with the slower increases recorded in the prior month. The report reveals that Manufacturing and Non-manufacturing indices printed 56.8 (September: 56.2 points) and 57.0 (September: 56.5 points) points respectively for the period under review. Whilst we reiterate that continued FX stability and availability remain the key driver of business health across the Manufacturing and Non-manufacturing space, we believe the commencement of the festive quarter must have boosted business sentiments as Q4 average PMI is historically the strongest. 

In the face of the renewed uptick in inflation, sustained improvement in PMI have thus far coincided with improved FX stability and availability, which continue to drive positive business sentiment. Hence, we expect the PMIs to remain strong through the rest of the year, with the imminent festive period also supporting sentiments. In our views, high crude oil prices, together with the possibility of inflows from Eurobond, will support CBN’s goal of keeping FX rates largely stable and liquid across all segments. Importantly, with Manufacturing, Service, and Agriculture contributing 9.3%, 37.5%, and 22.9% respectively to GDP, we expect overall growth in Q3-18 and Q4-18 will be supported by the resilience of these sectors.

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