CBN governor, Dr Olayemi Cardoso
It indicated that manufacturers’ capacity utilisation, production volume and investment, among others, dropped in the second quarter of the year due to harsh business operating environment.
According to the report, the composite PMI stood at 49.7 points, indicating a contraction in economic activities for the thirteenth consecutive months.
Economic activities, however, improved in July by 1.8 points when compared to the PMI for June 2024 which stood at 48.8 points.
“On the output level, suppliers’ delivery time and stock of inventory expanded while new orders and employment contracted at a slower rate compared to the levels recorded in the previous month,” the report stated.
The PMI index, which measures the performance of business activities, is based on the change in different aspects of respondents’ business activities.
An index above 50.0 points indicates an expansion in business activities while below 50.0 points indicates a contraction in business activities.
A sectoral breakdown showed that the Services Sector recorded a PMI of 50.3 points while the industrial sector recorded 48.3 points and the agricultural sector at 49.7 points registered a slower contraction when compared to the level recorded in the previous month.
The report further stated that 25 sub-sectors reported a decline in new orders, with pharmaceutical products reporting the highest levels of decline.
However, nine sub-sectors reported increased levels of new orders, but Cement and Forestry remained unchanged.
Nigerians are now paying three times more for antibiotics formerly produced by the British pharmaceutical giant, GlaxoSmithKline (GSK), one year after its exit.
Eighteen sectors out of 25 sectors reported a contraction in employment levels, with printing activities recording the highest decline in July while the Petroleum and Coal sub-sectors had the highest employment levels.
“At 48.7 index points, the composite employment level indicated contraction in July 2024 for the seventh consecutive month. The index improved in July 2024 when compared to the 48.3 points recorded in the previous month,” the report said.
In the services sector, the motion pictures, cinema, sound recording, and music production subsector registered the highest expansion, bringing the sector’s PMI to 50.3 points.
A survey conducted by the Manufacturers Association of Nigeria (MAN) revealed worsening impacts of the macroeconomic environment on the manufacturing sector in the second quarter (Q2), 2024.
The survey, which was entitled, ‘Manufacturers’ CEO Confidence Index (MCCI) Second Quarter, 2024’ covered the impact of macroeconomic environment on key manufacturing indicators such as production and distribution costs, capacity utilisation, volume of production, investment, employment, sales volume and cost of shipment in the period under review.
It confirmed the effect of the harsh macroeconomic environment on manufacturing indicators. The state of insecurity, rising energy costs and lending interest rates continue to reinforce the inflationary pressure, thereby making the operating environment highly unfavourable and sales less profitable for manufacturers.
The report showed that capacity utilisation declined further by 14.1 percent in Q2 2024 from 9.8 percent witnessed in the preceding quarter; the volume of production slid further by 11.9 percent in Q2 2024 from a contraction of 10.1 percent recorded in the previous quarter; while manufacturing investment dipped by 5.0 per cent in Q2 2024 from 5.2 per cent contraction recorded in the preceding quarter.
Manufacturing employment declined by 4.9 percent in Q2 2024 from the 5.3 per cent contraction recorded in the preceding quarter; sales volume fell by 9.3 per cent in Q2 2024 compared to the decline of 7.2 per cent witnessed in the preceding quarter, while cost of shipment rose by 17 per cent in Q2 2024 from the 22.2 per cent increase recorded in Q1 2024.
The report revealed a cursory observation of the analysis which showed that all the manufacturing indicators recorded unfavourable changes during the period of review.
“In addition to the forex scarcity, high exchange rate and heightened inflation, the unfavourable macroeconomic environment was aggravated by the skyrocketed increase in the electricity tariff, the consistent increase in interest rates, the perennial fuel scarcity and the nationwide industrial action during the reviewed quarter. All of these grossly escalated the cost of manufacturing operations, distorted the manufacturing value chain, discouraged investments, increased job losses and reduced sales volume,” it added.
The director-general of MAN, Segun Ajayi-Kadir said: “Nigeria’s path to sustained industrialisation and steady economic growth remains threatened as little to no attention is given to the numerous pressing challenges that limit the performance of the manufacturing sector, a sector widely regarded as the driver of economic growth and sustainable development.
“Undoubtedly, a rapidly growing economy is only achievable when the binding constraints hindering the performance of the manufacturing sector are confronted head-on.”
In line with the position of MAN, Ajayi-Kadir said, “it is recommended that the government committedly adopt the following measures to tackle the burning challenges that are waning manufacturers’ confidence and deviating the country from the path of a sustainable robust growth.”
Earlier, Stanbic IBTC’s PMI report for July showed that the headline index declined to 49.2 points, down from 50.1 points in June and below the 50.0 points no-change mark for the first time in eight months. This is a slight 1.01 point difference from CBN’s PMI for July.
According to the report, input costs and selling prices rose rapidly, although there were some signs that efforts to secure sales resulted in a slower pace of output inflation.
The report stated that prices increased sharply at the start of the third quarter as companies passed higher input costs through to their customers.
“The renewed decline in output was accompanied by a reduction in business confidence, with firms at their least optimistic since the survey began,” the report said.
