Data from the October report of Stanbic IBTC Purchasing Managers’ Index (PMI), which reflects Private Sector activity, shows that Nigerian businesses activity had a sharp decline in October 2024, with the purchasing manager index falling to 46.9 from 49.8 recorded in September. The statistics clearly illustrate the challenges that most Nigerian firms face in navigating the country’s rising Inflation rate, which stood at 32.70 percent in September. The headline PMI decline indicates a significant decline in business conditions, the most severe since March 2023.
Escalating Inflationary Pressures were a major factor in the deteriorating economic climate in the month under review. According to the most recent data, the private sector in the nation has contracted for four consecutive months, which is the most significant drop since March 2023. The sharp fall in output and new orders was mostly caused by the escalation of already high inflationary pressures brought on by weakening currency and growing fuel and transportation prices. As a matter of fact, selling prices rose in tandem with one of the most rapid increases in total input costs ever recorded.
Price pressures led to a decrease in purchasing activity.
Purchasing activity also dropped to its lowest point since March 2023. As a result, input stockpiles fell for the third consecutive month. On positive aspects, businesses continue hiring additional employees, increasing employment for the sixth consecutive month modestly. Staff compensation was raised to its highest level in seven months in an attempt to aid employees amidst growing living expenses. Businesses in the country quickly raised their selling prices in response to the precipitously rising cost of inputs. The charge inflation rate was the fourth-strongest on record and the fastest since March.
Customer demand was severely impacted by steep price increases, and new orders decreased for the first time in three months. Business activity declined to the greatest degree in 19 months, with the Agriculture sector being the only one to register an increase in output. Also, business confidence dropped to its lowest level ever in October due to sharp declines in output and new orders. Meanwhile, price pressures led to a decrease in purchasing activity as businesses reduced their input purchases in reaction to dwindling customer demand. Lead times for input delivery kept getting shorter due to low demand for inputs, supplier competition, and timely payments.
Headline PMI readings last reached 50 or above in 2023.
This data demonstrates a high deterioration of operational conditions over the course of the year, when comparing the October 2024 result of 46.9 to the survey’s estimate of 49.1 PMI for the same time in 2023—a minor decrease from the previous month’s 51.1. While the headline PMI increased slightly from 49.2 in July to 49.9 in August, it was still slightly below the 50.0 no-change threshold and indicated a generally steady picture of business conditions in the private sector of Nigeria. Subsequently, the PMI reading declined slightly to 49.8 in September 2024, indicating a further decline in business conditions for the third consecutive month.
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI), a key indicator of the condition of the private sector in Nigeria, continuous decline indicates the challenging business environment in the nation. It last reached a reading of 50 or above in September 2023, when it stood at 51.1. Since then, it has continuously fallen below this level, pointing to a downturn in business conditions. This drop illustrates Nigeria’s economic difficulties, such as inflation and exchange rate swings, which have impacted Manufacturing and other industries that depend on stable prices and imported goods.
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Moreover, this trend highlights persistent economic strains as companies struggle with growing expenses and declining customer demand, which has limited their capacity to increase Investment and production. It also emphasizes the necessity of policies aimed at stabilizing the Economy and encouraging private sector expansion. Given Nigeria’s enormous development potential in industries like manufacturing, technology, and agriculture, many economists contend that the country’s economy could rebound if structural challenges are addressed. However, without prompt action, the PMI drop would continue, putting additional pressure on companies and possibly delaying the pace of economic recovery.