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By Chinwendu Obienyi
Despite recording slight improvement in Nigeria’s business conditions, cost pressure and weak consumer demand have remained a huge challenge affecting the private sector, data from Stanbic IBTC Purchasing Managers’ Index (PMI) for Nigeria has revealed.
According to the report, the PMI for September stood at 51.1, up from 50.2 in August, indicating a slight monthly upturn in the private sector.
This encouraging development comes amid challenges faced by businesses in the country.
But strong cost pressures, driven by exchange rate weakness and higher fuel costs, continued to affect firms operating in the private sector.
Consequently, these factors contributed to a steep increase in input prices, with some of the sharpest rate rises on record. The PMI is a crucial indicator of business conditions, with readings above 50.0 signaling an improvement compared to the previous month, while readings below 50.0 points to deterioration.
According to analysts at Nairametrics, September’s PMI reading suggests that Nigeria’s private sector is experiencing a moderate uptick in activity, albeit still hovering just above the no-change mark.
They noted that new orders increased for the sixth consecutive month, reflecting an improvement in demand. However, this growth remains modest, primarily due to market conditions that have been characterised by weak consumer demand and price hikes that deter customers.
The report also revealed that output levels returned to growth in September following a slight reduction in August. Yet, similar to new orders, the pace of increase remained modest, with manufacturing being the only sector showing a decline.
It revealed that input surged, due to exchange rate fluctuations and escalating fuel expenses. According to the report, companies also had to raise wages significantly to help their staff cope with higher transportation costs which led to a notable increase in staff cost inflation.
Despite the rise in input costs, selling prices saw a steep rate of inflation. This was driven by the cumulative effects of increased purchase costs, despite being the weakest inflation rate since May.
Employment continued to grow slightly for the fifth month, indicating a cautious expansion. Purchasing activity expanded, but the rate of growth slowed to a six-month low.
A similar trend was observed in the growth of stocks of purchases. Suppliers’ delivery times were shortened due to competition among vendors, prompt payments, and favourable traffic conditions.
The report said, “Confidence in the year ahead outlook for output remained unchanged in September, but it remains one of the weakest on record.”
Companies that predicted an increase in activity primarily linked it to plans to hire additional staff to support business expansion”.
