7 Subsectors Post Mild Contractions in Economic Activities - CBN

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The Central Bank of Nigeria (CBN) has reported that seven subsectors recorded mild contractions in economic activities in November.

It revealed this in its Purchasing Managers’ Index (PMI) report for November.

It stated that the composite PMI expanded to 56.4 index points in November, compared to 55.4 index points in October.

A reading of the PMI above 50.0 index points signals expansion in economic activities and below a contraction.

The composite PMI which stood at 56.4 index points in November, signalled expansion in aggregate economic activity for the 12th consecutive month.

CBN uses the composite PMI to measure economic activities across three broad sectors – industry, services and agriculture.

In the review period, the services and agriculture sectors expanded to 56.8 index points and 58.2 index points, respectively while the industry sector fell to 54.2 index points, maintaining an expansionary trajectory.

Out of the 36 subsectors surveyed across the three sectors, 29 experienced expansion in economic activity while seven contracted.

Subsectors with mild contractions

The paper production subsector recorded the highest contraction to 42.5 points, followed by the electrical equipment subsector with 46.4 points.

Petroleum & coal products contracted to 47.8 points; and electricity, gas, steam, and air conditioning supply to 48.2 points.

While primary metals and chemical & pharmaceutical products contracted to 49.3 points apiece, non-metallic mineral products also contracted to 49.4 points.

“However, the overall impact was insignificant to offset the broad-based expansion observed across the other subsectors,” CBN stated.

A cursory analysis of the report shows that the seven subsectors that contracted fall under the industry sector, dragging the industry sector’s performance behind the other two sectors.

A further analysis shows that relative to the agriculture sector with 58.2 index points and the services sector with 56.8 index points, the industry sector posted the lowest index of 54.2 index points.

Of the 17 subsectors surveyed within the industrial sector, 10 recorded expansion, while the remaining seven subsectors experienced contraction.

“However, the contractions were marginal and did not offset the overall positive performance of the sector, which maintained an expansionary trajectory,” CBN stated.

Pinnacle Daily reports that the industry sector has remained subdued in its performance due to silent issues, including energy and borrowing costs, which significantly affect the sector’s productivity.

In a recent statement, the Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, lamented that the prevailing high interest rate puts enormous burdens on businesses that bear the elevated cost of borrowing.

He reiterated this concern while commenting on the CBN decision to keep the benchmark interest rate unchanged at 27 per cent at its November monetary policy committee meeting.

Ajayi-Kadir noted specifically that manufacturers had expected a further cut to reduce borrowing costs, which currently range between 30 and 37 per cent.

He stressed that a high interest rate not only impedes production but also reduces the sector’s competitiveness.

The MAN DG added that, while exchange rate stability and increased foreign exchange liquidity are critical for firms that rely on imports, lowering financing costs is also necessary to boost expansion and investment.

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