Economy
CBN April PMI Shows Improvement in Business Conditions
By Cordros Capital Research
According to the Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI) report for the month of April, manufacturing activities, during the month, expanded after three consecutive months of contraction. The report also shows that the non-manufacturing sector came within a whisker of exiting its 16-month streak of decline.
Specifically, the manufacturing PMI grew to 51.1, from 47.7, while the non-manufacturing PMI came in at 49.5 (vs. 47.1 in March).
Indeed, the notable improvement in April’s PMI came to us as no surprise, as it validated our expectation for the month. Suffice to say that business owners and manufacturers are positively responding to a number of encouraging developments in the broader macroeconomic space.
Here, we highlight (1) the CBN’s recent and sustained commitment to forex stability, particularly narrowing the spread between the official and parallel segments of the currency market rates, (2) government effort at improving the ease of doing business in Nigeria, as the Presidential Enabling Business Environment Council (PEBEC) rolled out fresh reforms to consolidate and deepen the impact of its previous plan, (3) the recent approval, by the FGN, of the reduction of documentation requirements and timeline for import and export trade transactions to 48 hours (4) the launch of the nation’s Economic Recovery and Growth Plan (ERGP), (5) the soon-to-bepassed 2017 appropriation bill, which will herald the establishment of Satellite Industrial Centres (SICs) across the six geo-political zones of the country, (6) an extension of the tenure of the 2016 budget’s capital spending projects until 5th May, 2017 amid a total sum of N1 trillion released from the same budget, thus far, for capex, and (7) a reported rebound in Nigeria’s business confidence, according to the latest edition of the Global Economic Conditions Survey.
Manufacturing PMI Bucks Declining Trend
The manufacturing PMI commenced the second quarter of the year on an impressive note, bucking its 3-month contraction trajectory, expanding by 3.4 percentage points, from 47.7 in March, to 51.1 in April. The notable improvement was supported by considerable expansions in production level (58.5, previously 50.8), new orders (50.1, previously 45.6), and inventories (50.6, previously 49.1), which we believe was in response to the relative stability – amid the apex bank’s renewed commitment to improve FX liquidity – of the NGN exchange rate (particularly at the parallel market) during the period under review. Clearly, this, in addition to improved power generation (close to 5,000MW), further strengthened manufacturers’ confidence, supported by the slower pace of contraction in employment level (46.6 vs. 43.6) during the month.
Ten of the sixteen sub-sectors reported growth in the review month, in the following order: appliances & components; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; cement; nonmetallic mineral products; printing & related support activities; furniture & related products; electrical equipment and plastics & rubber products. The paper products; primary metal; computer & electronic products; fabricated metal products; petroleum & coal products, and transportation equipment sub sectors reported decline in the review period.
Non-Manufacturing PMI Misses Expansion by a Whisker
The non-manufacturing PMI showed further signs of improvement, with the index, at 49.5, marginally shy of the 50 point expansion threshold. This marks the highest point of the index in its 16-month contraction spree.
Primarily, in April, the non-manufacturing PMI benefitted from the growth of 3.5 percentage points and 4.1 percentage points in business activity (53.3, from 49.8) and new orders (50.5, from 46.4). Also, the slower rate of contraction in employment level (45.5, previously 44.0) and inventories (48.6, previously 48.0) was positive for the overall nonmanufacturing index.
Of the eighteen non-manufacturing sub-sectors, eight recorded declines in the following order: management of companies; construction; professional, scientific & technical services; arts, entertainment & recreation; wholesale trade; health care & social assistance; repair, maintenance/washing of motor vehicles and accommodation & food services.
The remaining ten sub-sectors: agriculture; utilities; educational services; transportation & warehousing; finance & insurance; electricity, gas, steam & air conditioning supply; real estate, rental & leasing; information & communication; public administration and water supply, sewage & waste management reported growth in the review month.
Comment:
Clearly, April 2017 PMI figures speak to the fact that, manufacturing and non-manufacturing activities improved over the one month period. We look for the level of improvement achieved thus far being consolidated, going forward, as the impact of the positive drivers supporting the encouraging figures deepens. We highlight the (1) CBN’s sustained commitment to forex stability, (2) possibility of the 2017 appropriation bill being passed early this month, following which the establishment of the FGN Satellite Industrial Centres (SICs) across the six geo-political zones of the country will commence, (3) potential gains from the recently launched Economic Recovery and Growth Plan (ERGP), (4) full implementation of the Presidential Enabling Business Environment Council (PEBEC) fresh plans on the ease of doing business, and (5) sustained improvement in power generation, on the back of cessation of hostilities by militants in the Niger Delta, and the rise in water level at the various dams in the country.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange jumped 1.04 per cent on Wednesday, June 17, with the market capitalisation adding N26.99 billion to settle at N2.619 trillion compared with the previous session’s N2.592 trillion, and the Unlisted Security Index (NSI) rising by 45.1 points to close at 4,378.45 points, in contrast to the preceding day’s 4,333.35 points.
The rally was driven by the gains reported by two securities, which outweighed the losses posted by three securities, led by FrieslandCampina Wamco Nigeria Plc, which dipped by N1.95 to N178.19 per unit from N180.14 per unit. Geo-Fluids Plc lost 19 Kobo to close at N2.61 per share compared with Tuesday’s closing price of N2.80 per share, and Food Concepts Plc slid by 1 Kobo to N1.77 per unit from N1.78 per unit.
On the flip side, Central Securities Clearing System (CSCS) Plc recorded a N6.33 appreciation to trade at N86.57 per share versus the previous day’s N80.24 per share, and Light House Financial Services Plc grew by 10 Kobo to N1.13 per unit from the N1.03 per unit it closed a day earlier.
In the midweek session, the value of stocks traded by investors surged by 181.0 per cent to N128.3 million from the preceding session’s N45.6 million, the volume of securities increased by 305.6 per cent to 2.8 million units from Tuesday’s 688,290 units, and the number of deals executed jumped by 6.5 per cent to 33 deals from 31 deals.
At the close of trades, Great Nigeria Insurance (GNI) Plc remained the most active stock on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 67.3 million units exchanged for N4.6 billion.
GNI Plc also ended as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units sold for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
By Dipo Olowookere
As part of moves to boost its internally generated revenue (IGR) and increase its streams of income, Ayobo-Ipaja Local Council Development Area (LCDA) is considering commercial ostrich and crocodile farming.
The council recently held a sensitisation programme, where agribusiness experts engaged stakeholders, including residents and entrepreneurs, on the viability of this.
The programme provided participants with the knowledge on investment requirements, training opportunities, startup funding, and regulatory frameworks guiding ostrich and crocodile farming in Nigeria.
The chairman of Ayobo-Ipaja LCDA, Mr Lukmon Agbaje, commended the initiative, reiterating his administration’s commitment to promoting innovative agricultural practices as a pathway to sustainable development.
He described agriculture as a critical driver of economic transformation, stressing that modern farming has evolved into a profitable business venture with immense potential for youth empowerment and enterprise development.
Mr Agbaje further assured participants of the council’s readiness to partner with investors, agricultural institutions, and other relevant stakeholders to facilitate training, capacity building, and access to opportunities across the agricultural value chain.
On his part, the council’s Head of Department of Agriculture, Mr Wale Atepe, emphasised the growing market demand for products such as leather, meat, feathers, and other valuable by-products, adding that strategic investment in the sector could unlock significant opportunities for employment, wealth creation, and export earnings.
By Adedapo Adesanya
The Naira depreciated against the United States Dollar by 0.21 per cent or N2.89 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Wednesday, June 17, to N1,360.07/$1 from Tuesday’s closing rate of N1,357.18/$1.
In the same vein, the Nigerian Naira weakened against the Pound Sterling in the official market during the session by N4.42 to trade at N1,824.81/£1 versus the preceding session’s N1,820.39/£1, and lost N4.19 on the Euro to sell at N1,577.96/€1 compared with the previous day’s N1,573.79/€1.
However, at the GTBank segment, the local currency gained N1 against the greenback yesterday to exchange at N1,372/$1 versus N1,373/$1, and at the parallel market, it remained unchanged at N1,385/$1 at midweek.
The Naira’s performance comes amid tight inflows from exporters, non-bank corporates, and foreign investors, evidenced by the slow movement of the country’s gross external reserves level of $50.505 billion, despite muted inflows from oil sales after a recent drop in prices.
There have been reduced FX market interventions by the Central Bank of Nigeria (CBN) as it maintains its stance to keep the local unit stable enough to retain foreign investments.
The Nigerian government also dismissed a report suggesting that it was considering new taxes on telecommunications services and petroleum products, which would have spooked investors.
The federal government said that the reports misrepresented recommendations contained in the International Monetary Fund (IMF) Article IV Consultation Report on Nigeria, explaining that the recommendations were advisory and do not constitute government policy or binding obligations on Nigeria.
In the cryptocurrency market, prices were negative as traders and investors shrugged off a signed Iran peace deal that lifted stocks, after the Federal Reserve held interest rates but made clear it is more worried about inflation than growth.
Under the new Chair, Mr Kevin Warsh, the Federal Reserve left rates unchanged at 3.5 per cent to 3.75 per cent, in line with expectations, but its updated projections pointed to higher inflation and a slower pace of future rate cuts, and some officials floated the possibility that rates may still need to rise.
Cardano (ADA) slid 4.5 per cent to trade at $0.1731, Ripple (XRP) went down by 4.2 per cent to $1.16, Ethereum (ETH) shrank by 3.5 per cent to $1,727.55, Solana (SOL) lost 3.4 per cent to sell $71.05, Dogecoin (DOGE) also fell by 3.4 per cent to $0.0843, Binance Coin (BNB) slumped by 3.1 per cent to $587.53, and Bitcoin (BTC) crashed by 2.6 per cent to $63,892.28, while TRON (TRX) gained 0.7 per cent to finish at $0.3201, with the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closing flat at $1.00 each.
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