Nigeria’s industrial sector continued its contraction for the ninth consecutive month in September 2024, according to the latest Purchasing Managers’ Index (PMI) report published by the Central Bank of Nigeria (CBN).
The PMI for the industrial sector stood at 49.7, reflecting ongoing challenges, although the rate of contraction has slowed compared to previous months. This slight improvement signals a potential shift, with the sector edging closer to expansion, as it had earlier recorded a PMI of 49.4 in August 2024.
The contraction in the industrial sector, which began in January 2024, has become a persistent concern for Nigeria’s economy. The industrial PMI has struggled to break above the 50-point threshold, the benchmark for growth, throughout the year, underlining a sector hampered by declining production, weak demand, and structural inefficiencies.
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The industrial sector encompasses key subsectors like manufacturing, mining, quarrying, electricity, and construction, which are crucial to the country’s economic stability and growth. A slowdown in the contraction of these industries signals that while challenges persist, there are pockets of resilience that could spur future growth if the right interventions are implemented.
The September PMI reading of 49.7 suggests that the rate of decline is easing, providing a glimmer of hope for an eventual recovery.
The report revealed that 10 out of the 17 subsectors within the industrial sector recorded expansion during September, while three remained unchanged, and four experienced contractions. The worst-performing subsector was Paper Products, which saw the largest decline, whereas Cement experienced the most significant expansion, underscoring the varied performance across industries.
Sectoral Breakdown: Mixed Performance Across Industries
While the industrial sector remains in contraction, the Services and Agricultural sectors showed stronger performance. The Services sector expanded for the fourth consecutive month, buoyed by increasing demand and higher consumer activity. This sustained growth in services indicates a healthier performance in non-industrial areas of the economy.
Similarly, the Agricultural sector recorded its second consecutive month of growth, driven by improved harvests and government support programs aimed at boosting food production and agro-industrial activities. The positive trajectory in agriculture is vital for Nigeria, as it helps cushion the negative impacts of industrial sector declines by bolstering food supply chains and stabilizing rural employment.
However, the performance in the industrial sector remained uneven. While Mining, Quarrying, Electricity, Gas, Water Supply, and Construction registered expansions, the Manufacturing subsector continued to decline, underscoring the structural weaknesses plaguing Nigeria’s manufacturing base. High production costs, poor infrastructure, unreliable power supply, and supply chain disruptions have all contributed to the sector’s challenges, limiting its ability to recover fully.
Output and Raw Materials Are Positive but Employment Remains Weak
One of the few bright spots in the industrial sector’s performance in September was the expansion in the Stock of Output and Raw Materials indices, which reached 50.7 and 51.7 points, respectively. This indicates that businesses were able to build up inventories and secure raw materials for production, providing a cushion against potential future disruptions.
However, challenges remain in other key areas. The indices for New Orders and Employment continued to show contraction, with New Orders slipping to 49.9 points and the Employment index dropping to 48.2 points. The decline in New Orders signals weak demand across the industrial sector, while the shrinking employment numbers highlight persistent difficulties in sustaining jobs.
The Employment index in the industrial sector has been contracting since March 2024, when it hit a low of 45 points. While there has been gradual improvement, with September’s index at 48.2 points, employment levels remain under pressure, particularly in key subsectors such as manufacturing and heavy industry. Out of the 17 subsectors surveyed, eight experienced a decline in employment, seven reported growth, and two — Transportation Equipment and Water Supply, Sewerage & Waste Management — maintained stable employment levels.
This slow recovery in employment aligns with the findings of the Nigeria Labour Force Participation report, released by the National Bureau of Statistics (NBS) last month, which noted that the country’s unemployment rate rose to 5.3% in the first quarter of 2024. The report also pointed out that industries, especially in manufacturing, continue to shed jobs in response to sluggish demand and high operating costs.
However, the data from the September 2024 PMI report suggests that while the industrial sector remains in contraction, there is hope for a potential turnaround. Industry leaders note that the slowing rate of decline in the sector and the expansion seen in certain subsectors indicate that recovery, while fragile, is possible.
They, however, added that concerted efforts are needed to address the structural issues impeding growth, particularly in manufacturing and heavy industry, for a full-scale rebound to materialize,