Manufacturers record sluggish growth in Q2 as pandemic hits production
The lockdown in some states and curfew imposed by the Federal Government to check the spread of the coronavirus in the second quarter may have taken a toll on the performance of the manufacturing sector, as contributions of the sector to the economy showed contraction of -8.78% in the second quarter (Q2) 2020 from 0.43% in Q1 2020.
Indeed, manufacturing activities have yet to regain full momentum as production remains below par, while access to foreign exchange for critical raw materials is also restricted.
With the coronavirus pandemic forcing Nigerian bars, restaurants, hotels and event centres to shut down or maintain partial operation in some cases, operators in the real sector have to contend with newer challenges of poor demand and slow production.
Earlier, the latest data released by the Central Bank of Nigeria (CBN), showed that manufacturing purchasing managers index (PMI) in the month of July stood at 44.9 index points, indicating contraction in the manufacturing sector for the third consecutive month.
According to the National Bureau of Statistics (NBS), nominal gross domestic product (GDP) growth of the manufacturing sector in the second quarter of 2020 was recorded at -0.14% (year-on-year), or -37.92% points lower than figures recorded in the corresponding period of 2019 (37.79%), and -28.61% points lower than the preceding quarter’s figure of 28.47%. Quarter-on-quarter growth of the sector was recorded at -13.31%.
The contribution of manufacturing to nominal GDP in Q2 2020 was 11.79%, which was higher than recorded in the corresponding period of 2019 (11.47%), but lower than recorded in Q1 (12.98%).
In Q2 2020, real GDP growth in the manufacturing sector was -8.78% (year-on-year), lower than the same quarter of 2019 and the preceding quarter by -8.64% points, and -9.21% points, respectively. Growth rate of the sector on a quarter-on-quarter basis stood at –13.17%, lower than the quarter on quarter growth rate recorded in the preceding quarter of 2020.
Real contribution to GDP in Q2 2020 was 8.82%, lower than the 9.08% recorded in Q2 2019, and the 9.65% recorded in Q1 2020.
A decline in GDP means major economic activities are slow or sluggish, which may be a result of several factors.
The latest GDP number somewhat surpassed both the International Monetary Fund (IMF), and World Bank forecast for year 2020, which implies that Nigeria’s economy may witness yet the biggest contraction in four decades.
The IMF disclosed in its June outlook that the Nigerian economy would witness a deeper contraction of 5.4% as against the 3.4% it projected in April 2020.
According to the NBS, the 6.10% decline in GDP was largely attributable to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.
The recent labour statistics report released showed that the unemployment rate in Nigeria rose to 27.1% at the end of Q2 2020, as the impact Covid-19 pandemic is significantly being felt across critical sectors. While Nigeria has embarked on gradual easing of lockdown since Q2 with a N2.3-trillion stimulus intervention, economic activities are yet to fully peak, indicating a muted outlook in the remaining quarters of the year.
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