Business confidence in Nigeria wanes amid rising inflation

Business confidence is gradually slowing in Nigeria as soaring inflationary pressures continue to raise private enterprises operational costs, dampening growth and shrinking consumer’s purchasing power.

The latest monthly Purchasing Managers’ Index (PMI) by Stanbic IBTC Bank revealed that the “rates of inflation in the Nigerian private sector remained elevated in November, further hampering business operations”.

According to the report, the headline index declined to 49.6 in November from 46.9 in October. But PMI reading above 50.0 signals an improvement in business conditions, while those below show deterioration.

The report attributes the sustained decline to persistent inflation and muted demand conditions, which have dampened business activity in the private sector.

“Business confidence continued to wane in November and hit a fresh record low. Some firms remained optimistic in the outlook for output, however, amid business expansion and investment plans,” the report indicated.

Africa’s former largest economy is grappling with an upward trend in prices as inflation quickened to 33.88 percent in October exacerbated by a steep increase in petrol and food prices.

As prices continue to rise, businesses suffer more input costs and begin to slow down on employment in order to stay afloat. Elevated inflation in November’s survey pushed “employment down and companies continued to lower their purchasing amid steep price pressures”.

“Higher energy prices, increases in the cost of raw materials, and lingering currency weakness continue to lead to intensification of price pressures in November,” said Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank.

While the business climate of the country appears to be filled with uncertainties, the financial services firm projects that the Nigerian economy will maintain the Q3:24 growth momentum in Q4:24.

The stability in growth, according to Oni, will be supported by festive-induced increase in economic activity and sustained improvement in crude oil production.

“We estimate the economy to grow by 3.24% y/y in real terms in Q4:24 and adjust our 2024 growth estimate upward to 3.2% (previously: 3.1%),” Oni said.