Economy
Intense Price Pressures Slow Down Output Growth in Nigeria
By Aduragbemi Omiyale
Data released by Stanbic IBTC Bank in its Purchasing Managers’ Index (PMI) showed that the private sector recorded slowdowns in growth of output and new orders as a result of subdued demand and intense price pressures.
The report noted that the headline PMI for June 2024 read 50.1 points, which is lower than the 52.1 points recorded in May 2024 and the lowest in seven months.
It was disclosed that there were signs of inflationary pressures picking up, with purchase prices, staff costs and selling charges all increasing more quickly than in May.
Although new orders continued to rise in June, the rate of expansion was only marginal and the weakest in the current seven-month period of growth. There were some reports of underlying demand improving, but sharp price rises meant that customers faced challenges in being able to commit to new projects.
It was observed that companies increased their selling prices rapidly again in June, with the pace of inflation quickening slightly from that seen in May. The sharper rise in output prices was in tandem with a faster increase in input costs. Purchase price inflation was recorded amid currency weakness and higher raw material costs, particularly those related to animal feed.
Meanwhile, efforts to help workers with increased living and transportation costs led to a further solid rise in wages. In line with the picture for new orders, output rose at a slower pace during June.
“The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in growth of output and new orders.
“Notably, new orders recorded a near stagnation as new business increased only marginally and at the slowest pace in the current seven-month sequence of expansion.
“Besides, financial challenges at customers reportedly limited the ability of firms to fully benefit from any improvement in underlying demand.
“In line with the picture for new orders, output rose at a slower pace during June, settling at its weakest level in four months. Meanwhile, the rate of inflation in overall input prices remained elevated in June, ticking higher for the second month running to the strongest since March.
“Close to 60 per cent of respondents posted a rise in input costs during the month. In line with the trend in input costs, companies increased their selling prices sharply again in June. The pace of inflation quickened slightly from that seen in May.
“Nigeria’s private sector activity as measured by the headline PMI ended Q2:24 on a weak note as the domestic economy continues to be affected by elevated price pressures, high interest rates and lingering currency weakness.
“The PMI reading in the quarter is consistent with a likely slowdown in the non-oil sector’s growth to 2.6% y/y in Q2:24 from 2.8 per cent y/y in Q1:24.
“Nonetheless, headline inflation is likely to peak in June, with moderation expected in H2:24 as the year-on-year effects of PMS subsidy removal (which induced higher fuel prices) and significant currency depreciation (which accompanied the FX unification) fade.
“This, in addition to the commencement of the primary harvest season in September, is likely to provide some respite for consumers in H2:24,” the Head of Equity Research West Africa at Stanbic IBTC Bank, Mr Muyiwa Oni, said.
By Adedapo Adesanya
Crude oil prices fell on Friday as traders gained confidence that renewed conflict between the United States and Iran was growing less likely.
The price of Brent crude futures settled at $93.09 a barrel, down $1.94 or 2.04 per cent, and the US West Texas Intermediate (WTI) crude futures finished at $90.54 a barrel, down $2.50 or 2.69 per cent.
President Donald Trump said the US will win the conflict with Iran either “militarily or on paper,” referring to the fitful negotiations with the Iranian government, and he suggested he could meet with Iran’s reclusive supreme leader “if it was to make a deal.”
He also said he had no desire to meet with Iranian Supreme Leader Mojtaba Khamenei, who has not been seen since the outbreak of violence on February 28 and was reportedly seriously injured in US-Israeli air strikes. He, however, added that if the two sides reached a deal, it was possible the two leaders would meet.
Meanwhile, Hezbollah leader Naim Qassem rejected on Thursday a US-brokered agreement between Israel and the Lebanese government to halt the fighting. Iran has made a ceasefire in Lebanon a condition for any peace deal with America.
Oman said operations at Mina al Fahal port were unaffected after it was reported that oil loading had been suspended following an explosion near its mooring berths. Oman exports 800,000 to 900,000 barrels per day of crude from the terminal.
As the US-Iran war peace talks dragged on, traffic in the Strait of Hormuz, where a fifth of the world’s oil passes, remained limited. Gains have been capped by oil inventories lasting longer than expected, rerouted exports and falling demand.
The Organisation of the Petroleum Exporting Countries and its allies (OPEC) is sticking to its oil demand growth forecast of 1.2 million barrels per day for this year, its Secretary General Haitham Al Ghais said, despite the Middle East conflict and closure of the Strait of Hormuz.
OPEC crude output fell last month, hitting its lowest level in decades as the US blockade of Iran and disruption in the Persian Gulf continued to curb production.
Output from its 11 current members dropped by 1.22 million barrels per day to 16.33 million a day in May, with Iran accounting for more than half of the decline, according to a Bloomberg survey. That was the lowest in at least 37 years. The data excludes the United Arab Emirates, which left the organisation last month after six decades.
Key members of the OPEC+ are expected to nudge up targets by a modest 188,000 barrels again in July during a video conference on Sunday. The session is one of four online meetings OPEC and its allies are due to hold that day.
By Adedapo Adesanya
Crude production under the collective Organisation of the Petroleum Exporting Countries (OPEC ) fell in May to its lowest level in at least 37 years as the blockade of Iran by the United States and disruptions in the Persian Gulf, continued to limit output.
According to a Bloomberg survey released on Friday, output from the organisation’s 11 current members, including Nigeria, dropped by 1.22 million barrels per day to 16.33 million barrels per day last month.
Iran accounted for more than half of the decline. The data excludes the United Arab Emirates (UAE), which departed the cartel last month after six decades of membership.
War between a US-Israeli alliance and Iran has reduced oil supplies from the Middle East, largely closing the Strait of Hormuz waterway. Saudi Arabia, Iraq, the UAE and Kuwait have been forced to cut crude production. Iranian shipments face additional pressure following a US blockade of its ports imposed in mid-April.
Iranian output fell by 710,000 barrels per day to a five-year low of 2.34 million barrels per day in May, the survey showed. Central Command reported that US forces have redirected 127 commercial vessels to enforce the blockade of all maritime traffic entering and exiting Iranian ports.
Kuwait recorded the second-largest decline last month, with production falling by 310,000 barrels per day to 490,000 barrels per day, less than one-fifth of pre-war levels. Saudi Arabia, the group’s leader, saw output decrease by 240,000 barrels per day to 6.57 million barrels per day.
The production reductions have not prevented OPEC and its allies from raising quotas over recent months, continuing a year-long process of restoring output halted several years ago.
This comes ahead of a meeting scheduled to be held on Sunday, June 7, where a sub-group of seven members is expected to increase targets by 188,000 barrels again in July. The session is one of four online meetings OPEC and its partners plan to hold that day.
Delegates indicated the alliance has plans for two additional monthly quota increases in August and September. UAE output rose by 300,000 barrels per day to 2.44 million barrels per day in May, according to the survey.
By Aduragbemi Omiyale
The 2025 third quarter Budget Implementation Report from the Budget Office of the Federation has shown that the federal government exceeded the funds allocation for repayment of debts for the first nine months of the fiscal year by about 18 per cent.
In a report by Punch, the sum of N10.74 trillion was budgeted for debt servicing between January and September 2025, but the government used N12.63 trillion for the purpose, N1.90 trillion or 17.65 per cent more than the allocation for the year.
The funds were spent on domestic debts, foreign debts and sinking fund by the central government in nine months.
Business Post reports that for the whole year, the amount approved by the National Assembly and signed by President Bola Tinubu for debt repayments was N14.31 trillion.
Looking at the nine-month figures, domestic debt service gulped N6.23 trillion, exceeding its N5.39 trillion provision, while foreign debt service was N6.30 trillion versus the budget provision of N5.06 trillion.
According to the report, the figures indicated that 67.2 per cent of the federal government’s retained revenue of N18.63 trillion was spent on debt service in the first nine months of 2025. When the sinking fund is included, debt-related payments consumed about 67.8 per cent of revenue.
It was also observed that aggregate federal government revenue underperformed the budget by N12.03 trillion or 39.24 per cent, as actual revenue of N18.63 trillion fell short of the N30.67 trillion projected for the first three quarters.
In the third quarter alone, the government generated N7.70 trillion versus the quarterly target of N10.22 trillion as a result of persistent oil revenue shortfalls, despite stronger non-oil collections.
The debt burden also crowded out capital spending, as total capital expenditure was N3.10 trillion in the first nine months compared with the N17.58 trillion budgeted for the period, indicating that actual debt-related payments were more than four times capital expenditure.
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