Nigeria’s Production sector has continued to witness contraction, as the economy grapples with the spiral impact s of the COVID-19 pandemic. According to the current data released by the Central Bank of Nigeria, manufacturing PMI (i.e., Buying Manager’s Index) in the month of June stood at 41.1.
The latest figure suggests contraction in the production sector for the 2nd time, a decrease compared to 42.4 and 51.1 index points recorded in May and March 2020 respectively.
Key sectors wobble in contraction
Of the 14 surveyed subsectors, 5 subsectors reported development (above 50%threshold) in the month of June in the following order: electrical devices; cement; petroleum & coal products; transport equipment; and paper products.
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However, the staying 9 subsectors reported decreases in the following order printing & associated support activities; fabric, clothing, leather & shoes; primary metal; plastics & rubber items; nonmetallic mineral items; produced metal products; food, beverage & tobacco products; chemical & pharmaceutical items and furnishings & associated items.
As the production index tape-recorded a decline, production level, brand-new orders, employment level, and raw material stocks all recorded more decline compared to their May 2020 figures.
The composite PMI for the non-manufacturing sector stood at 35.7 points in June 2020, indicating contraction for the third consecutive month, however showing a gradual healing in non-manufacturing activities when compared to 25.3 recorded in May 2020.
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Likewise, all 17 subsectors surveyed under the non-manufacturing sector taped decreases.
What this suggests
PMI is a survey that is performed by the Statistics Department of the Central Bank of Nigeria that shows the changes in the level of service activities in the existing month compared to the preceding month.
For each of the indicators determined, this report reveals the diffusion index of the reactions, which is computed as the percentage of responses with positive modification plus half of the portion of those reporting no change, except for supplier shipment time, which is calculated as the percentage of reactions with negative modification plus half of the portion of those reporting no modification.
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The current PMI figure listed below 50 for the 2nd consecutive months indicates that Nigeria may publish a larger than anticipated contraction in the 2nd quarter of 2020, as yet unpredictability clouds the global economy in the staying quarters of the year.
Also, as essential sectors continue to suffer contraction, joblessness may surge in the economy. According to the Economic sustainability strategy recently released by the Nigerian federal government, unemployment may hit c.40%by the end of 2020.
You may download the PMI report by click on this link.
Economy & Politics
ECOWAS nations would need to relegate the self-reliance of their monetary authorities to a regional financial body.
6 mins back
June 25, 2020
Just Recently, President Muhammadu Buhari raised issues over the choice of West African Monetary and Economic Union (likewise known under the French acronym, UEMOA) to take up the Eco in replacement for its CFA Franc ahead of other ECOWAS member states.
We remember that in 2019, there were conversations by ECOWAS nations on the adoption of a single currency (Eco) by 2020.
The WAMZ was established primarily to come up with a single currency in West Africa for all ECOWAS member states.
Advocates of the Eco think the presence of different exchange regimes in the area restrains trade within the area due to high deal costs especially from fees for currency conversion and hedging expenses to cover currency exchange rate risk. With the AfCFTA arrangement set to remove tariffs on items and services, we believe the adoption of a single currency, if successful, will facilitate trade, lower transaction costs and assist in payments amongst ECOWAS countries.
In our view, the primary challenge in the adoption of a single currency originates from the fact that all getting involved nations will have to relegate the independence of monetary authorities to a local monetary body to be developed. With countries like Nigeria, Liberia and Sierra Leone still faced with double-digit inflation, which is in plain contrast to the single-digit inflation rate required by getting involved nations, relegating financial authority to a local body might end up being knotty.
Economy & Politics
The NESP was chaired by Vice President, Yemi Osinbajo, and made up of Cabinet Ministers.
2 hours earlier
June 25, 2020
The Federal Executive Council (FEC) has actually approved the N2.3 trillion stimulus recommended by the Nigerian Economic Sustainability Strategy (NESP).
The strategy will support the Nigerian Economy in the face of the disturbances and challenges of the Covid-19 Pandemic.
The media aide to the Presidency, Tolu Ogunlesi announced the goals of the NESP which is to, ” create jobs, put money into the economy, ideally, stop it from slipping into economic downturn, support small companies and prioritize local content”.
” The NESP is a 12 Month ‘transit’ plan in between the ERGP and the ERGP-Successor-Plan currently being worked on,” he included.
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The Minister of Finance, Zainab Ahmed announced that N500 billion of the stimulus package has actually been supplied in the modified 2020 Appropriation Act and would be moneyed from unique accounts.
” We also have N1.2 trillion of this fund to be sourced as structured low- cost loans, which are interventions from the Central Bank of Nigeria as well as other advancement celebrations and Organizations”.
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” We have N344 billion that will be sourced from Bilateral and external sources and also additional funds that we can source in your area,” Ahmed said.
Ogunlesi likewise revealed that the NESP was chaired by Vice President Yemi Osinbajo, and made up of Cabinet Ministers holding consultative conferences with the State Governors, EAC and National Assembly.
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Yemi Osinbajo’s Sustainability Committee recommended that the Stimulus be moneyed through a CBN “ structured loaning” of N1.1 trillion, N3029 billion from other funding and N500 billion from unique accounts.
The plan also suggested the production of over 10 million jobs in a 12 months period through a food for all jobs employing 5 million people which will cost N635 billion.
Mass Real estate method developing 1.8 million tasks, Solar energy technique expected to produce 250,000 tasks, Digital Economy method to develop 1 million jobs for outsourcing, National gas Growth Program to support the production of 1 million jobs, have all been initiated.
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Contributed to the list is a Road Building and rehab is forecasted to create 296,000 jobs in the 6 geo-political zones and a plan to develop 774,000 tasks for youths and women post COVID-19
BREAKING: The Nigeria Economic Sustainability Strategy (NESP) has actually today been authorized by the Federal Executive Council (FEC).
It’s a 2.3 Trillion Naira stimulus strategy to support the Nigerian economy in the face of the interruptions and obstacles of the Covid-19 pandemic.
— tolu ogunlesi (@toluogunlesi) June 24, 2020
Economy & Politics
The Federal Government has been under increasing pressure to decrease its debt and promote development.
5 hours ago
June 25, 2020
Among the greatest credit rating companies, Fitch Rankings, in its most current report, said that Nigeria’s international score is at danger, following a sharp increase in its sovereign financial obligation and a growing financing gap.
The rating company has divulged that these could set off a ranking downgrade, as policymakers in Nigeria struggle to deal with the effect of the low oil costs and sharp drop in earnings, triggered by the coronavirus pandemic.
Fitch, had in April reduced Nigeria’s Long Term Foreign Currency Provider Default Score (IDR) to ‘B’ from ‘B ‘ with a negative outlook. The downgrade and negative outlook in April, reflects the stress of continuous pressures on Nigeria’s external finances following the current crash of oil prices and the shock due to the coronavirus pandemic.
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According to Director at Fitch, Mahmoud Harb, ” We have two components that might lead us to take a negative score action/downgrade on Nigeria. Stress of external liquidity pressures and a sharp rise in federal government debt to profits ratio.”
The Federal Government has actually been under increasing pressure to decrease its financial obligation and stimulate development after its very first quarter current account turned unfavorable, with a misestimated local currency.
The report keeps in mind that Nigeria’s external reserve is bigger than the financing requires, however, external liquidity stress could increase if foreign financiers offer down their portfolio financial investments in the country, putting pressure on rankings.
Harb said that the financial obligation to profits ratio for Nigeria is set to weaken additional to 538%by the end of 2020, from 348%that it was a year earlier prior to enhancing a little next year.
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The CBN had limited access to the forex given that the crash of oil rates and the break out of coronavirus pandemic, in order to protect and strengthen the naira.
Fitch, had estimated that Nigeria would need $23 billion to satisfy its external financing requires this year. This may take the nation’s external reserve lower, particularly following the stopping of the prepare for the country to release Eurobonds.
Harb said that Nigeria could avoid a rankings downgrade if it improves its finances, reforms its foreign exchange policy and lower its deficit by boosting non-oil revenues.
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Nevertheless, the borrowing trend by the country seems to continue, with plans by the Federal government to borrow another $3 billion from the World Bank.
The Federal government had actually announced its plan to merge the currency exchange rate in order to produce more earnings and manage the rate in a sustainable way. The IMF had actually always specified that unifying the currency exchange rate would affect the economy more favorably than the multiple currency exchange rate, which trigger arbitrage.