Employment level drop 20 consecutive times
Nigeria’s employment index recorded another decline, as the latest Purchasing Managers Index, PMI, published by the Central Bank of Nigeria showed that employment level dropped by a point level.
Employment level index in the month of October 2016 stood at 42.2 points away from the 41.2 points level recorded in September 2016, indicating declines in employment level for the 20th consecutive month.
Production activities in the economy also decline as the manufacturing and non-manufacturing activities dropped in the month under review. According to the CBN, production level index for manufacturing sector declined for the 10th consecutive month at 42.3 index points, but at a slower rate than the index recorded in September 2016.
From the 14 subsectors in the manufacturing, only food, beverage and tobacco products sub-sector grew in the review period while 13 manufacturing sub-sectors, transportation equipment; petroleum and coal products; electrical equipment; primary metal; computer and electronic products; fabricated metal products; plastics and rubber products; furniture and related products; nonmetallic mineral products; printing and related support activities; paper products; textile, apparel, leather and footwear and chemical and pharmaceutical products recorded declining production level in October.
Similarly, composite PMI for the non-manufacturing sector recorded decline for the 10th consecutive month. The index stood at 43.4 points, indicating a slower decline when compared to the 41.0index in September 2016. Of the 18 subsectors under the non-manufacturing sector, only educational services and agriculture recorded growth, all other service sectors witnessed decline.
Despite the decline in business activities in the month, act invites in finance and insurance did pick up from contraction in September. The subsector recorded a PMI of 51.1 in October from 37.9 points in September, while wholesale trade declined faster from a PMI of 40.2 in September to 36.0 in October.
Meanwhile, outstanding bank loans to the economy rose to N13.8trillion by the end of the third quarter of 2016. The industry’s loan rose by 18percent against the N11.7trillion recorded in the corresponding period of 2015.
The new figure is made up of loans that have matured but remain either unpaid, rolled-over or restructured, as well as new ones created in the period under review.
The National Bureau of Statistics, NBS, report on selected banking industry statistics for the period, shows that the 17.9 percent escalation of loan portfolio was coming against just 4.02 percent growth in deposit base of the banks to N18.1 trillion in Q3’16 from N17.4 trillion within the same period in 2015.
The figures represent a growing funds mismatch, capital adequacy stress and liquidity ratio challenges in the banking industry in line with the report of the CBN for the first half of 2016 (H1’16) which pointed to inadequacies in funding of banks’ assets (mainly loan portfolio), with about N4.9 trillion funding gap recorded as at end June, 2016.
CBN in its H1’16 financial stability report, states that ‘‘large banks were resilient to credit risk and would be able to sustain an impact of the most severe shock of a 200 percent rise in non-performing loans, NPL, as it resulted in 12.60 percent Capital Adequacy Ratio, CAR, which was above the 10 percent minimum requirement.
‘‘However, banking industry, medium and small bank groups, showed vulnerability to the most severe shock of 200 percent rise in NPLs as their CAR fell to 8.01, 2.51 and -83.32 per cent respectively.”