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•Experts advocate quick fixes
By Chinwendu Obienyi
Nigeria’s economic landscape continues to darken, as the latest Stanbic IBTC Bank Purchasing Managers’ Index (PMI) report for November 2024 reveals a decline in business activity.
The downturn, marking a five-month low, lifts the lid on the nation’s struggle with persistent inflation, currency depreciation and waning consumer confidence.
The PMI headline index, a key barometer of economic health, fell to 49.6 points in November, a significant drop from the previous month’s reading of 46.9 points. A reading below 50.0 indicates a contraction in business activity, signaling a worrying trend that has persisted for five consecutive months.
Key factors driving this economic malaise include: soaring inflation, epitomised by the relentless surge in prices which has eroded purchasing power, dampened consumer demand and squeezed profit margins for businesses.
Another cause is currency depreciation seen in the weakening of the naira, which has made imports more expensive, further fueling inflationary pressures and increasing costs for businesses reliant on imported raw materials and machinery.
Also listed as the culprit is weak consumer demand. As disposable incomes dwindle, consumers are forced to cut back on discretionary spending, impacting a wide range of sectors, from retail to hospitality.
While the agriculture and manufacturing sectors showed some resilience, the wholesale, retail, and services sectors experienced significant declines. Businesses across the board have been compelled to reduce purchasing activity, cut back on inventory, and, in some cases, resort to layoffs to mitigate the impact of the economic downturn.
To address these pressing economic challenges, experts urge the government to implement a comprehensive set of policy measures like implementing well-calibrated fiscal policies that can stimulate economic growth, create jobs, and alleviate poverty.
They also pushed for improved governance by strengthening governance, reducing corruption, and ensuring transparency are essential for creating a conducive business environment.
Another area is infrastructure development by investing in infrastructure that can boost productivity, attract foreign investment and facilitate trade.
Another area is bolstering social safety nets by providing support to vulnerable populations and mitigating the impact of economic hardship and social unrest.
According to analysts, the removal of fuel subsidies and currency unification in 2023, while necessary for long-term economic stability, has had immediate adverse effects on the population.
To minimise social disruption, they said the government must implement effective social safety nets, provide targeted relief measures, and create job opportunities through public-private partnerships. They said it is imperative for policymakers to act decisively and implement timely reforms as Nigeria wades through the economic storm.
They explained that by addressing the root causes of the downturn, fostering a business-friendly environment, and prioritising the welfare of its citizens, Nigeria can hope to emerge from the crisis and embark on a path of sustainable economic growth.
