In May, Nigeria saw a boost in the Stanbic Purchasing Managers’ Index (PMI) to 52.1 due to enhanced business conditions, with both output and new orders showing increased growth compared to April. In January 2024, the headline PMI peaked at 54.5, marking the highest level in that month. The report indicated that managers observed modest Inflation growth as the rate of price increase began to stabilise. Nevertheless, demand remained suppressed in the month due to elevated prices.
Furthermore, the report indicates that new orders have increased for the sixth month, with growth observed across all sectors, particularly manufacturing. It also indicates that growth in the Nigerian Private Sector improved in May, as both output and new orders increased faster than in April. Despite this, the expansion rate was still below the average, as elevated prices affected demand. In May, the PMI headline reached 52.1, surpassing April’s 51.1 and marking the highest level since January.
Currency depreciation led to increased expenses for business materials.
This indicates a slight enhancement in business conditions within the Nigerian private sector, although not as significant as previous trends. New orders increased steadily in May for the sixth consecutive month. Moreover, with the currency depreciating, businesses faced higher expenses when purchasing materials, as inflation hit a one-year low in May. Elevated costs of input materials posed challenges for companies striving to finish their projects. Business owners feel less optimistic about the year ahead, as only 43 percent report a positive outlook for the rest of the year.
It marks a significant drop in confidence compared to earlier in the year. According to Muyiwa Oni, who heads the Equities Research department at Stanbic IBTC Nigeria, the bank predicts that demand will continue to be low compared to past levels, although he did mention that inflation could reach its highest point in May. In his statement, he mentioned that the PMI data for April and May suggest a small uptick in private sector performance for the second quarter of 2024.
Consumer demand may stay low due to rising inflation nationwide.
While there has been progress in the economy, it is not as remarkable as in the same period last year. Consumer demand is expected to remain low, especially with the additional challenge of rising inflation, which is anticipated to peak in May. The higher interest rates could harm the non-oil sector, potentially leading to a downward economic trend. As a result, it is predicted that there will be a modest Economic Growth of 3.51 percent in the upcoming quarter.
During April 2024, the country saw its inflation rate rise to 33.69 percent, primarily fuelled by a sharp increase in food prices, which surged by 40.53 percent in the same period. The nation also experienced a 2.98 percent growth in GDP during the initial months of 2024, with the services sector playing a crucial role in driving economic expansion. This inflationary pressure, particularly in food prices, poses significant economic challenges and may impact consumer spending and overall economic stability.
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Also, the Nigerian government and the Central Bank are expected to implement measures to stabilise the Economy and control inflation. Policy interventions include adjusting interest rates and introducing fiscal policies to manage the rising cost of living. Furthermore, efforts to boost domestic production and reduce reliance on imported goods could mitigate the impact of currency depreciation and high input costs. Enhancing the agricultural sector’s Productivity might alleviate food price inflation, improving consumer confidence and spending. However, the effectiveness of these measures will largely depend on their timely and efficient execution and the private sector’s adaptability to evolving market conditions.