Employment in Nigerian private sector slows as input costs soar

Employment in Nigerian private firms dropped for the first time in seven months as companies struggled with a weak currency and an 80 percent hike in fuel prices in two months that swelled their input costs.

The latest Stanbic IBTC Purchasing Managers Index (PMI) revealed that though the pace of reduction in employment was marginal, the overall fall in staffing levels was limited to just services firms.

“Employment was also down, thereby ending a six-month sequence of job creation,” the report stated. “Companies continued to lower their backlogs of work, while there was also a lack of pressure on capacity at suppliers”.

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The report released in November appears to be in tandem with the unemployment data released by the National Bureau of Statistics (NBS) which indicated that people seeking employment fell to 4.3 percent in the second quarter of the year.

While employment slows, rising input costs are not only leading to an increase in output prices, companies reported that customers were often deterred by high prices, dwindling sales.

According to the report, the inflationary environment and muted demand conditions meant that business activity continued to fall, the fifth month, highlighting the struggles of the private sector.

“Sector data pointed to increases in output in agriculture and manufacturing, but decreases in wholesale & retail and services,” the PMI survey stated.

Nigerian firms are suffering from a triple blow of high inflationary environment stoked by steep rise in fuel prices; exchange rate volatility and rising interest rates which is limiting expansion and increasing borrowing cost.

“Purchase costs rose rapidly again in November amid currency weakness and higher prices for fuel and raw materials. Although slowing slightly for the second month running, the pace of inflation remained elevated,” the survey indicated.

Read also: Business confidence in Nigeria wanes amid rising inflation

The rising inflation led to a surge in staff costs as companies eased their workers with higher living and transportation costs.

As businesses grapple with multiple headwinds, the headline PMI declined for the fifth consecutive month in November to 49.6 up from 46.9 in October, signalling a further deterioration in business conditions in the private sector.

The latest reading posted is below the 50.0 no-change mark that reflects confidence in the country’s business landscape.

While companies reported “tentative signs of demand improving”, authorities may need to ensure a stable currency and heighten the ease of doing business to lure in investors, provide employment and grow the economy.