Nigeria’s private sector ended the final month of 2021 on a robust expansion as Purchasing Managers Index (PMI) recorded 56.4 points.
The PMI report for December 2021 by Stanbic IBTC Bank, Nigeria, stated that, quicker uplifts in output and new orders as well as record inventory building were central to the improvement.
The bank said, purchase cost inflation accelerated to a fresh series high, and for the fourth month running, adding that, output price inflation followed suit, also quickening to a new survey peak in December.
The headline figure derived from the survey is the Purchasing Managers’ Index (PMI). Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.
At 56.4 in December, up from 55 in November, the latest expansion pointed to a robust overall improvement in business conditions. Moreover, the latest quarterly reading was at 55.2, the highest since the final quarter of 2019.
The report said: “a key driver of growth was the quickest rise in new orders for over two years. Firms mentioned fruitful marketing efforts and a general improvement in domestic and international demand.
“Subsequently, firms boosted output for the 13th month running, and at the quickest rate since August 2020. Sub-sector data revealed expansions across the board, although manufacturers recorded by far the strongest increase. Wholesale & retail, services and agriculture followed, respectively.”
“Meanwhile, historically elevated rates of new order growth led firms to engage in stockpiling strategies during the month. In fact, inventories increased at the quickest rate in eight years of data collection. Buying levels also increased substantially, and at the fourth-most marked rate in the series.
“As for prices, purchase costs rose at a survey-record rate for the fourth month running. Higher raw material prices, fuel costs and unfavourable exchange rate movements drove the increase. Favourable demand conditions allowed for costs to be passed on to clients at a record rate in December. Firms were optimistic for output growth in 2022 amid plans to broaden product offerings, increase advertisements and expand operations to new locations.”
The head of Equity Research, West Africa at Stanbic IBTC Bank, Muyiwa Oni said: “throughout 2021, we have seen consistent improvement in business conditions as evidenced by the PMI index which averaged 53.5 from January to December 2021 compared to 50.2 for the same period in 2020. The PMI reaching a two-year high in December 2021 reflects the impact of relaxed public health restrictions.”
He explained that, “indeed, strong demand and output levels have persisted over the last few months, even though growth has been somewhat constrained by significant price pressures impacting input and selling prices.”
He also noted that firms have been able to pass through the increased cost without it dampening overall demand and output, saying, “the report indicated that manufacturers recorded the strongest expansion during the month. The manufacturing sector has been one of the main drivers of growth in recent times.”