Business activity in Nigeria fell for the first time in eight months as price pressures weakened demand, a new Purchasing Managers’ Index (PMI) has shown.
The latest monthly PMI by Stanbic IBTC Bank released on Thursday showed the headline index declined to 49.2 in July from 50.1 in June.
Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.
“The renewed worsening in the health of the private sector mainly reflected the first reductions in output and new orders since November last year. In both cases, rates of decline were only modest,” the report said.
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It stated however that anecdotal evidence continued to highlight the negative impact of sharp price increases on customer demand, with clients often unwilling or unable to commit to new projects.
“Selling prices continued to increase sharply at the start of the third quarter as companies passed higher input costs through to their customers,” it said. “This was despite the rate of inflation easing to the slowest since May 2023 amid reports from some panelists that they had lowered charges as part of efforts to secure sales.”
Nigeria’s headline inflation quickened to 33.95 percent May 2024 from 33.69 percent in April 2024, according to the National Bureau of Statistics (NBS) report.
The report stated that this increase was for the 17th consecutive month, driven by food and non-alcoholic beverages.
The NBS noted that the top five contributors of inflation were food & non-alcoholic beverages, 17.59 percent; housing, water, electricity, gas & other fuel 5.68 percent, clothing & footwear, 2.60 percent; transport, 2.21percent; and furnishings & household equipment & maintenance, 1.71 percent.
Food inflation also rose by 15.84 percent to 40.66 percent, year-on-year. This was a result of an increase in the rate of the average prices of potatoes, yam and other tubers, bread and cereals, fish, meat, fruit, coffee, tea, and vegetables, NBS report said.
The latest monthly PMI by Stanbic IBTC Bank said further increases in purchase prices and staff costs were registered in July.
“Purchase price inflation quickened to a four-month high, often due to currency weakness but also higher raw material costs.
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“Meanwhile, the rise in employee expenses was broadly in line with that seen in June as companies continued to help workers with higher living costs, particularly those related to transportation,” it said.
It further stated that the renewed decline in output was accompanied by a reduction in business confidence, with firms at their least optimistic since the survey began, noting that business expansion plans meant that firms still expected output to rise over the coming year.
The PMI report said companies scaled back purchasing activity, with reduced demand for inputs and prompt payments helping lead to a further shortening of suppliers’ delivery times.
“Meanwhile, stocks of inputs increased. Employment also continued to rise slightly, with the pace of job creation quickening to the fastest in 2024 so far.
“Higher staffing levels and a drop in new orders meant that backlogs of work were cleared for the second consecutive month,” it said.
