Business activities in Nigeria have fallen for the fifth consecutive month in November as inflationary pressures remain elevated.
The latest monthly PMI by Stanbic IBTC Bank released on Monday showed the headline index declined to 49.6 in November from 46.9 in October.
The PMI reading above 50.0 signals an improvement in business conditions, while those below show deterioration.
The report attributes the sustained decline to persistent inflation and muted demand conditions, which have dampened business activity in the private sector.
Stanbic IBTC’s Purchasing Managers Index (PMI) report revealed that the rate of inflation in the Nigerian private sector remained elevated in the month of November, further hampering business operations.
The headline PMI posted below the 50.0 no-change mark for the fifth consecutive month in November, signaling a further deterioration in business conditions in the private sector.
That said, at 49.6, the latest reading was up from 46.9 in October and pointed to only a marginal decline.
The report released yesterday showed that “there were some signs of improvement midway through the final quarter, however, as new orders returned to growth and the decline in output softened. That said, employment was down and companies continued to lower their purchasing amid steep price pressures.”
It said that “the less pronounced deterioration in business conditions in part reflected a renewed expansion in new orders, which rose slightly following a solid fall in October. Although there were some tentative signs of demand improving, companies reported that high prices often deterred customers.
“The inflationary environment and muted demand conditions meant that business activity continued to fall, the fifth month running in which that has been the case. The latest reduction was only marginal, however. Sector data pointed to increased output in agriculture and manufacturing but decreases in wholesale and retail and services.
“Purchase costs rose rapidly again in November amid currency weakness and higher fuel and raw materials prices. Although slowing slightly during the second month, the pace of inflation remained elevated. Staff costs were also up as companies helped their workers with higher living and transportation costs.”
Stanbic IBTC added that in response to increasing input costs, output prices also continued to rise at a substantial pace midway through the final quarter of the year, explaining that business confidence continued to wane in November and hit a fresh record low.
Speaking, the head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni said, “The Nigerian private sector activities deteriorated further in November, albeit at a less pronounced rate relative to October.
“This less pronounced deterioration was primarily due to the return to growth of new orders in November, having decreased solidly in October. Notably, new orders have now risen in three of the past four months, although the latest expansion was only modest.
“We expect the economy to maintain the Q3, 2024 growth momentum in Q4, 2024, supported by festive-induced increase in economic activity and sustained improvement in crude oil production. Indeed, based on the November PMI survey results, companies reported some tentative signs of demand improving although high prices deterred some customers. On balance, we estimate the economy to grow by 3.24 per cent year-on-year in real terms in Q4, 2024 and adjust our 2024 growth estimate upward to 3.2 per cent from previously 3.1.”
“The inflationary environment and muted demand conditions meant that business activity continued to fall, the fifth month running in which that has been the case,” the report noted.
Despite the overall decline, sector-specific data revealed mixed outcomes. The agriculture and manufacturing sectors experienced modest increases in output, while the wholesale, retail, and services sectors recorded decreases.
High input costs and weak demand also prompted companies to scale back purchasing activity and reduce stocks of inputs.
“This situation, in turn, led to a reduction in employment levels, marking the first such decline in seven months. However, the overall fall in staffing levels was marginal, primarily affecting the services sector,’ it said.
Companies continued to lower their backlogs of work during the month, reflecting a lack of pressure on supplier capacity.
The report highlighted that while conditions remained challenging, the pace of decline was less severe compared to previous months.
“Business confidence continued to wane in November and hit a fresh record low. Some firms remained optimistic in the outlook for output, however, amid business expansion and investment plans,” the PMI report said.
