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Inflation, currency weakness dampen business activities in Nigeria in August –PMI report

By Chinwendu Obienyi

Rising inflation, currency weakness dampened business activities in Nigeria, thus dropping to the lowest in 5 months, a new Purchasing Managers’ Index (PMI) report for August 2023 has said.

The latest monthly PMI by Stanbic IBTC Bank on Friday showed the headline index dipped to 50.2 in August from 51.7 in the previous month. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.

“Nigerian private sector business activity dipped into contraction midway through the third quarter of the year as severe and strengthening price pressures acted to diminish demand,” the index report showed.

“It revealed that both overall input costs and output charges increased to the largest extent since the survey began almost a decade ago.

“Inflation again reflected higher transportation costs as a result of the removal of the fuel subsidy, plus currency weakness. Rising transportation costs also caused supplier delivery delays,” it added.

The report revealed that August’s headline PMI was the lowest in the current five-month sequence of improving business conditions. “The index signaled only a marginal monthly strengthening of the health of the private sector.”

The PMI index, which measures the performance of the private sector, is derived from a survey of 400 companies from agriculture, manufacturing, services, construction and retail sectors.

It is a composite index based on five individual indexes with the following weights: new orders (30 percent), output (25 percent), employment (20 per cent), suppliers’ delivery times (15 per cent) and stock of items purchased (10 per cent), with the delivery times index inverted so that it moves in a comparable direction.

May’s PMI index (54.0) saw the highest growth since the beginning of the year. The report further noted that steep price rises presented a challenge for firms to secure new orders and added that August saw only a marginal increase in new business, with the rate of expansion the softest in the current 5-month sequence of growth.

It said, “similarly, employment also rose marginally. Meanwhile, business activity decreased slightly mid-way through the third quarter, ending a 4-month period of expansion. It also added that the sector data pointed to a drop in activity in wholesale and retail and no change in services.

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