The recent monthly Purchasing Managers’ Index (PMI) released by Stanbic IBTC Bank on Tuesday reveals that business activity grew in April 2023 in Nigeria, Africa’s largest economy, as the naira returned to normal circulation following two consecutive months of shortage. There was an increase last month to 53.8 from 42.3 in March and 44.7 in February, according to the headline PMI. If the number is higher than 50.0, business circumstances are improving, and if it’s lower than that, things are becoming worse. For the first time in three months, April saw the headline PMI rise above the 50.0 no-change benchmarks.
As the cash shortage decreased, the private sector in Nigeria showed signs of improvement. The increased availability of funding has led to reports of increased growth in new business and production at several companies. However, companies showed continued caution in the hiring process, resulting in a slight drop in employment. The study revealed conflicting price movements at the beginning of the second quarter. It indicated that while input costs climbed faster, companies increased selling prices at the slowest pace in three years to attract customers.
Productivity surges across other sectors of the country.
Moreover, the index used to measure how well the private sector is doing is produced from a survey that was given to 400 different businesses in the areas of agriculture, manufacturing, services, construction, and retail. It is a composite index that is constructed on five individual indexes with the following weights: Stock of Items Purchased (10 percent), Suppliers’ Delivery Times (15 percent), Employment (20 percent), Output (25 percent), and New Orders (30 percent). The index for Suppliers’ Delivery Times has had its value inverted so that it’s trending in a direction that corresponds to that of the other indices.
According to Stanbic IBTC Bank analysts, improved operating conditions showed a lessening of the cash crisis that has severely impacted the economy in recent months. As the number of customers increased, combined with increased access to cash, the panelists observed a more reasonable business environment. Thus, both output, as well as new business expanded significantly in April, analysts said, breaking off two-month decrease sequences in each. They also noted that the wholesale and retail service and production sectors had all seen increases in activity.
Currency in circulation fell to its lowest in 14 years.
Despite a marginal improvement from March, the disposition among entrepreneurs and management remained dismal in April. According to what they found, the level of optimism was one of the lowest reported since the study was first conducted in January 2014. Because of the Central Bank of Nigeria’s (CBN) strategy of redesigning the naira, Nigerians have been experiencing a chronic scarcity of cash ever since the year began. This shortage came about on by the policy. The result has been a disruption in both economic operations and the livelihoods of a great number of individuals.
Further statistics by the CBN revealed that the total amount of money in circulation fell to its lowest point in 14 years and five months in February, coming in at N982.1 billion after having been at N1.39 trillion in the prior month. In response to a Supreme Court ruling to prolong the legal tender profile of the old N200, N500, and N1,000 notes until December 31, 2023, the CBN transferred naira notes from its vault to deposit money banks in March, causing a 71.41 percent increase to N1.68 trillion.
Business activities increase due to cash availability.
Muyiwa Oni, head of equity research for Stanbic IBTC Bank in West Africa, said that when the cash constraint problem was resolved in April, production and consumer demand rose. Oni disclosed that while businesses in all four major sectors (agriculture, manufacturing, services, and wholesale/retail) saw increased activity as a result of increased availability of cash, they were nonetheless cautious about adding to their employees. Nevertheless, business sentiment is still comparatively low, given that a recovery in business activity and access to capital is anticipated to be unreliable and will remain in the near term.
Stanbic IBTC: Website