Nigeria’s Manufacturing Index Grows at Slow Pace

• CBN directs banks to pledge N1bn govt securities for OTC trade settlement

Obinna Chima

Activity in the manufacturing sector expanded in May, but at a slow pace compared with the previous month, the Central Bank of Nigeria’s (CBN) Manufacturing Purchasing Managers’ Index (PMI) released Thursday has shown.

This clearly reflected the slowdown in Nigeria’s Gross Domestic Product (GDP) in the first quarter of 2018, to 1.95 per cent, from 2.11 per cent recorded in the fourth quarter of 2017.

Meanwhile, as part of efforts to enhance efficiency in trading and post-trade activities, the CBN has directed all banks to pledge collateral of N1 billion worth of government or CBN securities for over-the-counter (OTC) transactions.

According to the report released by the CBN, the PMI for May stood at 56.5 index points, indicating expansion in the manufacturing sector for the 14th consecutive month, but at a slower rate when compared to the index in the previous month.

Of the 14 sub-sectors surveyed, 10 reported growth in the review month in the following order: petroleum and coal products; paper products; plastics and rubber products; electrical equipment; food, beverage and tobacco products; cement; chemical and pharmaceutical products; primary metal; printing and related support activities; and textile, apparel, leather and footwear.

On the other hand, the transportation equipment; fabricated metal products; non-metallic mineral products; and furniture and related products sub-sectors declined in the review month.
Also, at 58.8 points, the production level index for the manufacturing sector grew for the 15th consecutive month in May 2018.

The index indicated a faster growth in the current month, when compared to its level in the preceding month.
But nine out of the 14 manufacturing sub-sectors recorded increase in production level, two remained unchanged, while the remaining three recorded declines in production level during the review month.
At 54.9 points, the new orders index grew for the 14th consecutive month, indicating increase in new orders in May 2018.

In all, seven sub-sectors reported growth, two remained unchanged while five contracted in the review month.
“The manufacturing supplier delivery time index stood at 57.5 points in May 2018, indicating faster supplier delivery time for the twelfth consecutive month.

“Nine sub-sectors recorded improved suppliers’ delivery time, three remained unchanged while two sub-sectors recorded delayed delivery time
“The employment level index in May 2018 stood at 55.2 points, indicating growth in employment level for the 13th consecutive month.

“Of the 14th sub-sectors, eight sub-sectors increased their employment level, three remained unchanged while three reduced their employment level in the review month,” it stated.

Furthermore, the report showed that the manufacturing sector inventories index grew for the 14th consecutive month in May 2018. At 58.7 points, the index grew at a slower rate when compared to its level in the previous month.
In all, 10 of the 14 sub-sectors recorded growth, two remained unchanged while two recorded decline in raw material inventories

However, the CBN has directed all banks to pledge collateral of N1 billion worth of government or CBN securities for over-the-counter (OTC) transactions.
The directive becomes effective today.

The CBN explained in a circular posted on its website yesterday, which was signed by its Director, Financial Markets Department, Dr. Alvan Ikoku, that the policy was also expected to build confidence in the financial market.
“The pledge requirement is mandatory for all Deposit Money Banks that wish to participate in OTC trade settlement. Lack of provision of the pledge or failure to top-up a pledge when required will result in exclusion from the market.

“This circular takes effect from June 1, 2018. Please ensure compliance,” the CBN stated in the three-paragraph statement dated May 31, 2018.