Manufacturing activity in Nigeria slowed down this month according to the country’s central bank, in what is an indication of an impending recession in Africa’s largest economy on the back of the devastating COVID-19 pandemic.
The Purchasing Manager’s Index, a widely used monthly indicator of economic health for the manufacturing and services sectors, stood at 41.1 in June, showing a contraction for the second time having fallen to 42.4 in May from 51.1 index points recorded in March.
Of the 14 subsectors surveyed in the CBN PMI report released this week, only 5 subsectors reported growth – above the 50 percent benchmark – while the remaining subsectors, including majors chemical and pharmaceutical products; textile, apparel, leather, and footwear as well as plastics and rubber products, posted declines.
The report also shows a plunge in production level, new orders, employment level, and raw material inventories compared to their May figures, as the economy grapples with the economic fallout from the Covid-19 crisis.
All subsectors surveyed under the non-manufacturing sector also recorded declines. Overall, the composite PMI for the sector stood at 35.7 points in June, indicating contraction for the third consecutive month, but showing a gradual recovery in non-manufacturing activities when compared to 25.3 recorded in May.
With the latest manufacturing PMI figures showing a decline for a second consecutive month, Nigeria may post a bigger than expected contraction in the second quarter of 2020, analysts say, coupled with the increased uncertainty hanging over the global economy as the coronavirus outbreak shows no signs of slowing down.
That uncertainty led to the International Monetary Fund to slash its global growth forecasts in its June 2020 World Economic Outlook update, noting that the pandemic has had a more negative impact on activities in the first half of 2020 than anticipated, and recovery is projected to be slower.
“We are definitely not out of the woods,” Chief Economist and director of IMF’s research department Gita Gopinath said Wednesday. “This is a crisis like no other and will have a recovery like no other.”
As with earlier projections, there is a “higher-than-usual” degree of uncertainty around this forecast, the Fund said. Across the world, countries are experiencing surges in new cases, complicating plans to reopen their economies. Nigeria, for instance, lifted lockdowns in key states back in May but has been recording at least 400 positive coronavirus cases per day for more than a week – the country now has more than 22,000 cases.
The path of the recovery remains difficult to track, Gopinath said, much will depend on the development of a vaccine or cure for the coronavirus disease or whether future waves create the need for additional lockdowns.
As key sectors continue to suffer contraction, Nigeria’s economy – disrupted by the pandemic-triggered fall in global oil prices – is expected to decline -5.4 percent this year, according to the latest IMF projections. That would worsen the unemployment situation in Africa’s most populous nation with around 200 million people, experts warn.