Operators seek fiscal policies to aid real sector performance

Though the Manufacturing Purchasing Managers’ Index (PMI) for August stood at 57.1 index points, indicating further expansion in the manufacturing sector for the 17th consecutive month, stakeholders in the private sector have urged for fiscal policy measures that check unintended consequences on cost of operations of businesses.

According to the PMI report for August 2018, which was released recently by the Central Bank of Nigeria (CBN), out of the 14 sub-sectors surveyed, 13 reported growth in the review month, indicating a faster rate when compared to the index in the previous month.The sub-sectors that witnessed growth include electrical equipment; non-metallic mineral products; cement; furniture and related products; plastics and rubber products; textile, apparel, leather and footwear and petroleum and coal products.

Others are chemical and pharmaceutical products; paper products; fabricated metal products; printing and related support activities; food, beverage and tobacco products and primary metal.

The transportation equipment sub-sector, however, declined in the review month.The Lagos Chamber of Commerce and Industry (LCCI) noted that fiscal policy measures of government need to be subjected to rigorous scrutiny and sensitivity analysis in order to avoid backlash on the economy and the welfare of citizens.

According to the chamber’s Director-General, Muda Yusuf, there should be a good balance between the interests of the consumers and those of the investors. The chamber expressed concerns about the decline in the performance of the real sector in second quarter of 2018, noting that the declines were recorded in spite of the interventions given to support the real sector, by both monetary and fiscal authorities.

“Some of the recent 2018 fiscal policy measures may have adverse implications for cost of operations in some sectors as well as negative welfare effects on the citizens. It is necessary to review some of the import duty component to reduce the negative effect on some sectors as well as the adverse implications on welfare of citizens”, he added.

The production level index for the manufacturing sector was recorded at 59.3 points, growing for the 18th consecutive month in August 2018. This also indicated a faster growth in the current month when compared to its level in the preceding month.The report, prepared by the Statistics Department of the apex bank to aid policy decision, further revealed that 13 of the 14 manufacturing sub-sectors recorded increase in production level.

Also, at 56.9 points, the new orders index grew for the 17th consecutive month, showing increase in new orders in August.Similarly, 11 sub-sectors reported growth; one remained unchanged, while two contracted in the month under review.

Furthermore, the PMI report showed that the employment level index in August stood at 55.5 points, indicating growth in employment level for the 16th consecutive month. Of the 14 sub-sectors assessed, nine reported increased employment level, three remained unchanged while three others reported reduced employment level in the review month.

The report also showed that the manufacturing sector inventories index grew for the 17th consecutive month At 57.1 points, though at a slower rate when compared to its level in the previous month.

It stated that 11 of the 14 sub-sectors recorded growth, while three recorded decline in raw material inventories.

Meanwhile, the composite PMI for the non-manufacturing sector stood at 58.0 points in August, indicating an expansion in the non-manufacturing PMI for 16 consecutive months. The index grew at a faster rate when compared to that in July 2018.

Fourteen of the 17 sub-sectors recorded growth in agriculture; repair, maintenance/washing of motor vehicles; information and communication; water supply, sewage and waste management; educational services; wholesale/retail trade; finance and insurance; arts, entertainment and recreation; real estate rental and leasing; health care and social assistance; transportation and warehousing; management of companies; accommodation and food services; electricity, gas, steam and air conditioning supply.

The public administration sub-sector remained unchanged, while utilities; professional, scientific and technical services and construction sub-sectors recorded contractions in the review period.At 59.3 points, the business activity index grew for the 17th consecutive month, indicating expansion in non-manufacturing business activity in August.