Nigeria’s manufacturing Purchasing Managers’ Index (PMI), a gauge for manufacturing sentiments, has sustained an upward trajectory, as it hits 51.1 points in June 2022.
This was revealed in a communique by the Monetary Policy Committee of the Central Bank of Nigeria (CBN) from a meeting held on July 18 and 19, of2022.
“This reflects the continued rebound in economic activities due to improvements in supplier delivery time; raw materials inventory; employment levels as well as expansion in some sectors such as agriculture, accommodation, electricity, amongst others,” the report read.
Moving above the 50 points benchmark, the PMI increased from 48.9 points in May. Consequently, it is expected that the economy will sustain the positive growth observed in the last few quarters. Concerns were however raised seeing that the ongoing Russia-Ukraine crisis poses a threat.
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“The major external shocks to the economy remained those associated with the supply constraints arising from the Russia-Ukraine war and backlash from sanctions imposed on Russia; residual impact of the COVID19 pandemic; and tightening external financial conditions, following the aggressive normalization of monetary policy by some advanced economy central banks,” it stated.
Since Russia’s invasion of Ukraine in February, manufacturers in Africa’s largest economy have suffered production hiccups as the supply of raw materials like wheat became limited and the price of diesel as a major source of energy surged by over 100 percent causing a surge in the cost of production.
This is significant seeing that Nigeria is unable to supply and distribute sufficient electricity leaving manufacturers at the mercy of alternative energy sources such as the use of generators that consume diesel.
In addition to this, the much-needed foreign exchange to purchase inputs is not readily available, consequently, manufacturers are forced to rely on black market operators for their dollar needs even though it is more expensive.
John Aluya, Vice President, Manufacturers Association of Nigeria (MAN), Lagos Zone told BusinessDay at a recent conference that manufacturers in some parts of the country buy diesel at N1,100 per litre while the dollar is bought at over N600.
The MPC advised the financial regulator to continually support the agricultural and manufacturing sectors using its development finance tools, especially as it explores options to effectively curtail the unabated rising trend of inflation.