Manufacturing sector pushes Nigeria’s PMI to 52.1% in May

Despite high prices which has continues to curtail demand, Nigeria’s Stanbic Purchasing Managers’ Index (PMI) rose to 52.1 in May, the highest since January 2024.

According to the report, the rise in new orders continued for the sixth consecutive month as all sectors saw growth, especially in the manufacturing sector.

It stated, “May data pointed to a pick-up in growth in the Nigerian private sector, with both output and new orders increasing at sharper rates than in April. Rates of expansion remained slower than the respective series averages, however, as high prices continued to limit demand.”

“The headline PMI posted 52.1 in May, up from 51.1 in April and the highest since January. The latest reading signaled a modest improvement in business conditions in the Nigerian private sector, but one that was still less pronounced than the historical trend. New orders increased solidly in May, extending the current sequence of growth to six months.”

Furthermore, currency weakness resulted in an increase in purchasing costs as the rate of inflation dropped to a one year low in May. Businesses also saw high prices of input materials inhibited efforts to complete projects.

In terms of outlook for the year, the confidence of business owners was at its lowest since February with only about 43 per cent reporting having a positive outlook for the remaining months of the year.

Speaking on the report, the Head of Equities Research at Stanbic IBTC Nigeria, Muyiwa Oni said the bank expects demand to remain weak in comparison to the historical average but noted that inflation might peak in May.

He said, “The April and May headline PMIs point to a slight improvement in private sector activity in the second quarter of 2024, although still underwhelming compared to the second quarter of 2023.

“We expect domestic demand to remain weak relative to historical average, exacerbated by inflationary pressures which may likely peak in May.”

He also explained that the elevated interest rate levels could have a negative pass-through effect on the non-oil sector. He projected the economy to grow at 3.51 per cent in the second quarter of the year.

Nigeria’s inflation rate rose to 33.69 per cent in April 2024 as food prices jumped to 40.53 per cent for the month.

Also, in the first quarter of 2024, the country’s GDP grew 2.98 per cent as the services sector contributed the most to the economy for the quarter.