The latest Purchasing Managers Index (PMI) report released by the Central Bank of Nigeria (CBN) shows that the manufacturing sector saw a rebound in November after several months of contraction due to the pandemic-induced lockdown.
PMI is a survey conducted by the apex bank and shows changes in the level of industrial activity on a month-to-month basis. A composite index above 50 points indicates an expansion, 50 points shows there is no change, while an index below 50 points means the sector is contracting.
According to the report, the manufacturing PMI rose to 50.2 points this month, halting six consecutive months of declines since May. The figure stood at 49.4 points in October, 46.9 in September, 48.5 in August, 44.9 in July, and 41.1 in June.
In May, the PMI was at 42.4 from more than 51 in March, in what was the steepest pace of contraction in manufacturing activity since August 2016, as the negative effects of the novel coronavirus and government measures to control it hit factory activity.
The CBN report also disclosed that eight out of the 14 surveyed subsectors reported expansion (above 50% threshold) in the month under review. Similarly, only six of the eleven indices measured expanded in November.
On the other hand, PMI for the non-manufacturing sector stood at 47.6 points in November 2020 – indicating slowing contraction in non-manufacturing activities. Only three sub-sectors reported growth of the 17 surveyed sub-sectors.
“The latest PMI data should fuel some optimism that the economy may be back on a recovery path,” a research analyst at a top Lagos-based investment bank said but cautions that the growth remains “fragile.”
The manufacturing PMI reading for November is the highest level since the imposition of lockdowns and social distancing measures in Q2 2020 due to the global coronavirus outbreak, which led to many business closures and value chain disruptions.
While lockdowns and movement restrictions have since been eased as the Covid curve flattened, a renewed surge in virus infections in the United States and several parts of Europe has triggered new lockdowns.
There are fears the second wave of infections could spread to this part of the world, returning Nigeria and Africa at large to lockdowns. While there have been significant breakthroughs in the development of vaccines to combat the virus, it could take up to a year to distribute them across the world.
“There is the possibility of a second wave as seen in other parts of the world and then there are other several challenges apart from the Covid-19 shock that the economy is still facing. Oil prices remain low leading to U.S. dollar shortages, tight FX liquidity, product shortages, and security challenges. So the rebound is fragile,” the analyst said.
As of Thursday morning, Nigeria had recorded more than 65,000 positive coronavirus cases, over 61,000 recoveries, and 1,163 Covid deaths, according to data from the Nigeria Centre for Disease Control (NCDC).