A recent Purchasing Managers’ Index (PMI) report released by Stanbic IBTC Bank has painted a concerning picture of Nigeria’s economic landscape, indicating a significant drop in business activity.
The latest data showcased a decline in the headline index to 48.0 in November 2023 from the previous month’s 49.1, marking the lowest point in business activity over eight months.
The PMI is a vital indicator, with readings above 50.0 signalling an upturn in business conditions, while figures below the benchmark denote a downturn. In this case, the index reflects the fourth instance of Nigeria’s business activity contracted this year.
Inflationary pressures emerged as a critical factor negatively impacting businesses, with companies grappling with challenges from elevated prices. According to the report, this pressure led to a decrease in both new orders and output, attributed to customers’ reluctance or inability to cope with increased charges.
The report highlighted a notable acceleration in purchase prices, marking a nearly two-year high. Factors contributing to this surge include the weakening exchange rate and heightened costs for fuel and materials, amplifying the challenges businesses face across sectors.
As noted in the PMI report, this sustained decline in operating conditions has been primarily steered by reductions in output and new orders, both witnessing consecutive declines for the second month. These declines have been more pronounced than those experienced in October, indicating a trend of increasing severity.
Derived from a survey encompassing 400 companies spanning agriculture, manufacturing, services, construction, and retail sectors, the PMI index comprises individual indexes with varying weights. These factors include new orders, output, employment, suppliers’ delivery times, and stock of items purchased.
While May’s PMI index boasted the highest growth rate for the year at 54.0, reflecting robust expansion in business conditions, the recent consecutive downturns raise concerns about the resilience of Nigeria’s private sector amid persistent economic challenges.