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COVID-19 Disrupts Manufacturing Sector in March, Growth Slows to Record Low

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  • COVID-19 Disrupts Manufacturing Sector in March, Growth Slows to Record Low

The manufacturing sector expanded at a slower pace in the month of March following a decline in raw material inventories and supplier delivery time as disruption in global logistics due to ravaging coronavirus weighed on the sector.

In the report released by the Central Bank of Nigeria (CBN) on Tuesday, the manufacturing Purchasing Managers’ Index (PMI) stood at 51.1 index points in March, down from 58.3 index points recorded in the month of February before the coronavirus pandemic.manufacturing 1While the index has now expanded for 36 consecutive months, the drop in the rate of growth from 58.3 to 51.1 was the largest in recent years.

Accordingly, out of the 14 subsectors surveyed by the CBN, only 7 subsectors recorded growth above 50 percent in March. The seven subsectors are transportation equipment; petroleum & coal products; furniture & related products; food, beverage & tobacco products; cement; fabricated metal
products and plastics & rubber products.

However, electrical equipment; primary metal; nonmetallic mineral products; paper products; textile, apparel, leather and footwear; printing & related support activities and chemical & pharmaceutical products subsectors all recorded declines in the month of March.

Similarly, production in the sector declined from 58.9 index points achieved in the month of February to 54.1 index points in the review month. Again, while index points above 50 levels indicate growth, the degree of decline from 58.9 to 54.1 shows the effect of coronavirus on the sector that depends largely on China for most of its raw materials.

According to the report, only 7 of the 14 subsectors surveyed recorded growth while the remaining 7 subsectors experience declines in production level. This was despite the production level in the sector expanding for the 37th consecutive month in March.

Demand also moderated in the manufacturing sector from 59.1 index points posted in February to 52.3 points in March, suggesting that growing shut down and disruption of global logistics are weighing on new orders. Five of the subsectors reported growth with two subsectors remaining unchanged during the month. Activities in the remaining seven subsectors declined in the month of March.

The gauge of supplier delivery time shows due to global restrictions that led to the disruption of global logistics, suppliers are finding it hard to meet demand. Therefore, delivery time contracted during the month to 49.4 index points, down from 58.4 index points achieved in the month of February. Making it the first month of contraction after 33 consecutive months of growth.

Employment in the manufacturing sector also contracted for the first time in 34 months in March. Job creation in the sector dropped from 56.4 index points to 47.1 points, suggesting that weak business activities in the sector have started hurting new job creation barely a month after the coronavirus hits the country.

Only three subsectors experienced improved employment in the month under review while ten of the 14 subsectors surveyed experienced declined in employment level. One subsector was unchanged.

In a similar manner, the raw material inventories contracted for the first time to 49.4 basis points in March, down from 58.5 points reported in the month of February. Just three of the 14 subsectors recorded growth, three subsectors were unchanged while eight subsectors reported lower raw material inventories due to the pandemic.

The global economy has started to record significant slow down in growth as stated by the International Monetary Fund on Monday. The fund said global growth is currently negative and that the world should be prepared for a repeat of the 2008 economic crisis or something worse.

South Africa on Monday announced a 21-day lockdown to curb the spread of the virus after the total number of confirmed cases jumped to 554. That is a nation already in recession with little to zero fiscal space to cushion the economy.

The story is not different in Nigeria, Africa’s largest economy. The government was forced to cut the 2020 budget of N10.59 trillion by N1.5 trillion and also adjusted the foreign exchange rate of local Naira to reflect the current economic fundamentals.

While the number of confirmed cases (44)  were fewer than South Africa, the rate of increase remains a concern as more than 32 of that number were reported in the last 6 days.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial market.

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Economy

Nigeria’s Main Refineries Record N406.62bn Loss in Two Years

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modular refinery

Port Harcourt, Kaduna, Warri Refinery posts N406.62bn Deficit in Two Years

Nigeria’s three main refineries recorded N406.62 billion loss in two years, according to the audited financial statements from the Nigerian National Petroleum Corporation (NNPC).

The three refineries located in Port Harcourt, Kaduna and Warri have a combined installed capacity of 445,000 barrels per day, however, the refineries have continued to function below the installed capacity.

The audited report showed the Kaduna refinery posted N64.34 billion loss in 2018, better than the N111.89 billion loss reported in 2017.

While Warri refinery filed N44.44 billion loss for 2018, also better than the N81.60 billion loss posted in 2017.

Port Harcourt refinery reported N45.59 billion loss in 2018, down from N55.76 billion loss posted in 2017.

The Nigerian government has spent billions of US dollars in maintaining and trying to improve the dilapidated refineries over the years. However, because of the inability of the three refineries to meet daily petrol demands of the Nigerian people, the Federal Government resulted to importation that has eroded the nation’s foreign reserves.

A recent report from the NNPC showed that Nigeria spent N2.37 trillion on petrol importation between May 2019 and May 2020 despite the nation struggling with falling foreign reserves due to low oil prices.

The weak foreign reserves has disrupted the nation’s economic outlook and weighed on the Nigerian Naira. The Naira has been devalued by 15 percent this year and was recently adjusted from N360 per US dollar exchange rate to N380/US$ for importers and investors to ease pressure on the nation’s foreign reserves.

Last week, at a summit organised by Seplat, Mallam Mele Kyari, the Group Managing Director, NNPC, said the three refineries were all idle despite the money being spent on them.

In Nigeria today, we are importing practically every petroleum product that we consume in this country.

“We are working to make sure that we are able to fix our refineries,” Kyari stated.

All hopes are now on Dangote’s refinery.

Aliko Dangote, Africa’s richest man and the world’s richest black man, is presently constructing a 650,000 barrels per day refinery.

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Osinbajo Says FG Plans to Create 5 Million Jobs

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Buhari and Osinbajo

FG to Create 5m Jobs from Strategic Investments in Manufacturing, Agriculture

Vice President, Prof. Yemi Osinbajo, has said the Federal Government plans to create at least 5 million jobs in the next few years.

Osinbajo, who spoke at the Virtual Presidential Policy Dialogue Session organised by the Lagos Chamber of Commerce and Industry (LCCI), said the Buhari-led administration is focused on job creation.

He, therefore, stated that this would be achieved with strategic investments in key sectors like the manufacturing and agriculture sectors.

The Vice President said, “We are to create jobs and boost our national housing programme. We would be intentional in the support of manufacturers in using our local raw materials. We are seriously engaging the use of cement in building our roads, as it will be cheaper for us and more durable.

“We are targeting electrification of five million households with solar power, and we are supporting SMEs, especially in the pharmaceuticals to enhance the production of personal protective equipment.”

Mrs. Toki Mabogunje, the President of LCCI, who also spoke at the event, expressed concerns over the failure of the Nigerian Customs Service to adhere to the Executive Order which forbids Customs checkpoints around the ports and within given geographical delimitations in the country.

She also noted the slow pace of reforms in the oil and gas sector, one of the nation’s main sectors. According to her, the oil and gas sector was another cause for worry, saying up till now the PIB passed has not been signed by President Muhammadu Buhari.

According to her, “Closure of the land borders has enormous implications for cross border economic activities around the country. The indications are now that the closure is indefinite. While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem.

“We are excited about the signing of the AFCTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far.

“We are aware of the efforts of government to fix our infrastructure, including roads and railways, but funding has remained a major challenge. We would like to see a new funding model with much bigger focus on private sector capital within a Public Private Partnership [PPP] framework for infrastructure development in the country.

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Economy

Fuel Scarcity: NUPENG to Commence Strike on Monday

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Petrol Importation

Lagosians Should Brace for Fuel Scarcity as NUPENG Embarks on Strike

Nigerians should brace for fuel scarcity as the national leadership of the Nigeria Union of Petroleum and Natural Gas (NUPENG) directed all petroleum tanker drivers to withdraw their services from Lagos State starting from Monday, 10 August 2020.

In a statement released by NUPENG on Friday, the union said the directive followed the failure of various authorities in Lagos State to address three major issues that had impacted the operations of petroleum tanker drivers in the state for several months.

The statement signed by the National President, Williams Akporeha and the General Secretary, Olawale Afolabi, NUPENG and titled title ‘NUPENG leadership directs withdrawal of services by petroleum tanker drivers in Lagos State with effect from Monday, August 10, 2020,’ noted that members of the union are frustrated and pained by the barrage of challenges faced while carrying out their activities in Lagos State.

NUPENG said, “The entire rank and file members of the union are deeply pained, frustrated and agonised by the barrage of these challenges being consistently faced by petroleum tanker drivers in Lagos State and are left with no other option but to direct the withdrawal of their services in Lagos State until the Lagos State Government and other relevant stakeholders address these critical challenges.

“It is sad and disheartening to note here that we had made several appeals and reports to the Lagos State Government and the Presidential Task Force for the decongestion of Apapa on these challenges but all to no avail.

NUPENG listed the major challenges faced by petroleum tanker drivers in Lagos State as extortion and harassment by various security agents and, area boys’ (miscreants).

This menace must stop and the leadership of these security operatives in Lagos State must go all out to call their men to order with immediate effect.

The Union added that it is sad that the security agents who were expected to ensure the free flow of traffic and protection of road users were the same people using their uniforms and arms to intimidate, harass and extort money from petroleum drivers in Lagos State.

Therefore, it said it had embarked on an indefinite strike to force the Lagos State Government to address the situation.

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