Business activity in Nigeria has dropped to the lowest in eight months as inflationary pressures remain elevated, a new Purchasing Managers’ Index (PMI) has shown.
The latest monthly PMI by Stanbic IBTC Bank released on Friday showed the headline index dropped to 48.0 in November 2023 from 49.1 in the previous month. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.
This is the fourth time that the country’s business activity has shrunk for the year.
“Companies in Nigeria continued to be negatively impacted by strong inflationary pressures in November, with new orders and output both falling as customers were either reluctant or unable to pay higher charges,” the report said.
It said purchase prices rose faster in almost two years amid exchange rate weakness and higher costs for fuel and materials.
“At 48.0 in November, the headline PMI remained below the 50.0 no-change mark for the second month running midway through the year’s final quarter,” it added.
According to the report, the index signalled a modest deterioration in business conditions, and one that was the most marked since the cash crisis in the opening quarter of the year.
“The overall decline in operating conditions was in large part driven by further reductions in output and new orders. Both fell for the second month running, and to greater extents than in October.”
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 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.
May’s PMI index (54.0) saw the highest growth since the beginning of the year.