Forex interventions propel PMI to 58.9%-FBNQuest

The series of intervention by the Central Bank of Nigeria(CBN) to ease foreign exchange (forex) scarcity in the country has propelled the manufacturing Purchasing Managers’ Index (PMI) to 58.9%.

According to FBNQuest Research, PMI reading no 49, all five sub-indices- output, employment, new orders, suppliers’ delivery times and stocks of purchases- picked up in April and all were in positive territory, showing a surge from 52.8 points in March to 58.9 points in April.

Recall that the Manufacturing PMI for the month of April 2017 released by the CBN on Friday showed signs of  recovery as the production level was growing faster; new orders and raw materials inventories were also growing from contraction; employment level was declining  at a slower rate; while supplier delivery time is struggling to catch up.

“The Manufacturing PMI stood at 51.1 index points in April 2017, indicating expansion in the manufacturing sector after three months of contraction”, says the apex bank.

However, FBN Quest , in its own index, gives 55 points for employment, its highest since November 2015.

It adds: “Among the answers to the trigger questions, we note a common theme of an improvement in supplies of raw materials, as well as an uptick in demand. The surge in April was led by large companies (with more than 200 employees), which would logically have been the main beneficiaries of the greater availability of inputs. 
“Since its circulars of late February, the CBN has stepped up its sales of forex to retail (for invisibles) and to importers. One consequence has been naira appreciation on the parallel forex market. We are not sure whether the appreciation has further legs to run but readily acknowledge the impact of the measures on at least part of the manufacturing sector. 
“According to our narrative, the economy is emerging from recession. In Q4 2016, the contraction of the economy narrowed from -2.2 per cent year-on-year( y/y) in the previous quarter to -1.3 per cent, and that of manufacturing from -4.4 per cent y/y to -2.5 per cent. We see token positive GDP growth of 0.2 per cent y/y in Q1 2017.”

Meanwhile, Vice-President Yemi Osinbajo, has said that the Federal Government is nudging the Central Bank of  Nigeria (CBN) to replace some of the 41 items not eligible for foreign exchange.

Speaking at The Platform, a programme organised by Covenant Christian Centre, on Monday, Osinbajo said the government is seeking to review the list to exclude items that need to be important for local manufacturing.

“In stabilising the macroeconomic environment, we’ve focused on aligning our fiscal and monetary policy, and nudging the central bank in the general direction of allowing a more market-determined exchange rate,” Osinbajo said. 
“We are also working on replacing some of the 41 items not valid for foreign exchange with a more trade policy driven alternative. Taking into account those items that are required and locally unavailable, which we must continue to import,” he said.