Operating companies in Nigeria are seeing some uptick in business activities, helped by increased demand for their products and a boost in output, both of which were badly affected by the COVID-19 induced lockdown last year.
Purchasing Managers’ Index, a gauge for manufacturing and non-manufacturing sentiments, tracked by Stanbic IBTC, signalled another modest expansion in the Nigerian private sector, underpinned by solid growth in new orders and output.
The headline PMI figure which was for February expanded by 52.0 from an expansion of 50.7 in January, indicative of a stronger improvement in overall business conditions.
Manufacturing and nonmanufacturing companies in the survey indicated a continued expansion of purchasing activities and resumed hiring efforts during the month. Signs of spare capacity were again evident, with a fresh record reduction in backlogs registered.
That’s despite the continuation of COVID-19 restrictions in foreign markets as exports rose during the month, with foreign demand for Nigerian goods and services showing signs of improvement.
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Similarly, new order inflows rose sharply, with the pace of growth accelerating during the month. The improving demand environment supported growth in output which was solid and extended the period of expansion to three months.
Meanwhile, unfavourable exchange rate movements, higher material costs and a rise in wages added to strong inflationary pressures with overall input prices increasing at a record pace.
To support higher output volumes, companies added to their purchasing activity for the eighth month in succession. Consequently, firms raised their inventory holdings in anticipation of greater output in the months ahead. Vendor performance also improved, although the degree at which lead times shortened eased to the softest in nine months.
Elsewhere, further signs of spare capacity were signalled, with backlogs falling at the most marked rate in the series. Nonetheless, firms added to their workforces, with employment rising marginally.
The rate of overall input price inflation quickened to the strongest in the series, largely reflecting higher purchase costs. According to respondents to the survey, higher material costs and unfavourable exchange rate movements contributed to a sharp uptick. However, the stronger demand environment allowed firms to pass on higher prices, with charges rising substantially.
Looking ahead, sentiment regarding output over the next 12 months reached a 10-month high as business expansion plans fueled positive expectations. That said, the degree of optimism remained below the longrun series average suggesting pandemic uncertainty weighed slightly on hopes for the future.
