Nigeria’s business activity rises to 3-month high on stronger naira

Business activity in Nigeria rose to the highest in three months in April 2024 as a result of the improvement in the strength of its currency, a new Purchasing Managers’ Index (PMI) has shown.

The latest monthly PMI by Stanbic IBTC Bank released on Thursday showed the headline index improved to 51.1 last month from 51.0 in March. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.

“The headline PMI points to a fifth consecutive monthly improvement in business conditions in the Nigerian private sector, but one that was only slight overall. Conditions for firms continued to be heavily influenced by movements in the naira and the subsequent impact on prices,” the report said.

It said an improvement in the strength of the currency over the past month led to sharp slowdowns in rates of increase in purchase prices and output charges, although inflationary pressures remained substantial nonetheless.

“The latest rise in selling prices was the softest in just under a year. Slower price increases were seen across all four broad sectors covered by the survey,” it added.

According to the report, although price increases were less pronounced than in March, the extent of inflationary pressures continued to limit rates of growth in output and new orders in April, both of which were unchanged from the previous month.

The PMI index, which measures the performance of the private sector, is derived from a survey of 400 companies from agriculture, manufacturing, services, construction and retail sectors.

It is a composite index based on five individual indexes with the following weights: new orders (30 per cent), output (25 per cent), employment (20 per cent), suppliers’ delivery times (15 per cent), and stock of items purchased (10 per cent), with the delivery times index inverted so that it moves in a comparable direction.

Agriculture and manufacturing both saw output increase sharply, while wholesale & retail activity also rose. On the other hand, services activity decreased, according to the authors of the report.

“Inflationary pressures softened in the Nigerian private sector during April, following record increases in purchase costs and selling prices in March. Rates of inflation remained elevated, however, and limited growth of output and new orders as well as leading some firms to reduce employment,” they said.