Nigeria’s Manufacturing Sector Contracts in December -CBN
Manufacturing activities in Africa’s largest economy, Nigeria, contracted in the month of December, according to the latest report from the Central Bank of Nigeria (CBN).
The Purchasing Managers’ Index (PMI) that measures activities in the sector stood at 49.6 index points in December, indicating a contraction when compared to the level recorded in November.
According to the report, out of the 14 subsectors surveyed, only 4 subsectors recorded expansion above the 50 percent threshold in the following order: Transportation equipment, Nonmetallic mineral products, Paper products and Food, beverage & tobacco products.
While 9 subsectors posted contractions in the following order: Primary metal, Petroleum & coal products; Cement, Electrical equipment, Fabricated metal products, Printing & related support activities, Plastics & rubber products; Chemical & pharmaceutical products and Furniture & related products.
The remaining 4 subsectors, Textile, apparel, leather & footwear remained unchanged in December.
Activities in the manufacturing sector contracted despite the usual high demand for products in December, suggesting that the third devaluation of the Naira dragged on the sector as manufacturers struggle to access forex for importation of raw materials.
In November, the central bank announced it has devalued the nation’s currency by N6 to better reflect the recent change in the country’s fundamentals.
However, that is the third time the Central Bank of Nigeria will be devaluing the Nigerian Naira in 2020 alone. This was despite the negative effect of COVID-19 on manufacturers that depends on importations for most of their raw materials.
Still, production in the sector expanded in December at 51.6 index points with 6 of the 14 subsectors surveyed recording expansion while 4 subsectors posted a decline in production. The remaining 4 subsectors were unchanged in the month of December.
As expected, new orders remained above the 50 percent threshold in the month under review. The CBN said demand in the sector stood at N50.2 index points in December 2020 with 5 subsectors recording expansion, 2 subsectors were unchanged flat and the remaining 7 contracted.
Job creation in the manufacturing sector remained weak at 46.3 index points, only the transportation equipment subsector recorded growth in employment level in December while 9 subsectors contracted with just 4 subsectors remaining unchanged.
Economic recession, weak earnings and poor consumer spending continues to hurt both the manufacturing and non-manufacturing sector that also contracted to 45.7 index points in the same month.