Nigeria’s factory activity expanded in January thanks to growth in output and acceleration in new orders, helping lift business confidence to highest in 13-month, the Stanbic IBTC Purchasing Managers Index shows.
Despite accelerating inflation, the PMI report states that purchasing activity also expanded significantly, but job creation eased owing to difficulties in wage payment, contributing to a rise in backlogs of work.
The report notes that headline PMI rose to 54.5 in January from 52.7 in December, above the 50 no-change mark for the second month running and signalling a solid improvement in the health of the private sector.
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The strengthening of business conditions was the most pronounced in 21 months, the report says.
“The recovery in new orders which began in December gathered momentum in January amid reports from panellists of strengthening demand. New business increased sharply, and to the largest degree since April 2022,” the report says.
“Business activity also rose for the second successive month in January and at the fastest pace in 21 months. All four broad sectors covered by the survey posted improvements in output.”
“In turn, companies also expanded their purchasing activity at a sharp pace, with stocks of inputs up accordingly. Firms were helped in their efforts to secure inputs by quicker deliveries from suppliers.”
According to the report, the accumulation in stocks of purchases in part reflected plans for further improvements in output in the coming months.
“Companies remained optimistic that output will increase over the year ahead and were more confident than in December.”
“Companies remained optimistic that output will increase over the year ahead and were more confident than in December.”
Bucking the wider trend of a strengthening recovery, employment increased at a softer pace in January amid some reports that firms had faced challenges paying staff, the report says, noting that it contributed to a second successive monthly rise in outstanding business.
The report states that purchase prices rose at the softest pace in eight months, but naira weakness and higher production costs sustained accelerating inflation.
The report also adds that the country’s accelerating inflation is showing some signs of easing.
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“The rate at which staff costs increased was broadly unchanged from December as firms helped workers with higher living costs, particularly those related to transportation.”
“Matching the trend for input prices, the rate of output charge inflation remained elevated but eased to an eight-month low at the start of 2024.”
The PMI index 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 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent) and stock of items purchased (10 percent), with the delivery times index inverted so that it moves in a comparable direction.
