Modupe Gbadeyanka
By Aduragbemi Omiyale
Business activities in Nigeria, especially in the private sector, witnessed the weakest rate of improvement in June, a report from Stanbic IBTC Bank has revealed.
This was attributed to the recent challenges around cash shortages as it affected new order growth, causing a renewed decline in output in the period under review.
In its Purchasing Managers’ Index (PMI) for the month, the lender said the Nigerian private sector recorded 50.9 points, lower than the 53.9 points achieved in May, signalling a 24th successive monthly improvement in business conditions in Nigeria’s private sector, though the weakest improvement for 17 months. Any reading below the 50.0-point mark means deterioration.
The report stated that central to the moderation last month was a renewed contraction in output which fell for the first time in 19 months. Although marginal overall, the latest fall contrasted with sharp expansions in recent months. Firms overwhelmingly blamed weaker inflows of new work, but there were also mentions of cash shortages.
Meanwhile, new orders rose for the twenty-fourth month in a row. The rate of growth was marginal and eased to the softest in this sequence, however, as elevated costs deterred some clients from placing orders.
Turning to prices, overall input price inflation quickened from May and was the fourth- steepest in the series’ history. Firms reported higher purchase costs (particularly for fuel and raw materials) and rising staff costs.
Subsequently, and in line with weaker inflows of new work, purchasing activity rose at the weakest pace since January 2021. Stocks of purchases continued to rise sharply, however, and at a rate that was in line with the long-run series average.
Staffing levels rose for the seventeenth month in succession during June amid efforts to boost output. That said, the rate of growth was modest with some firms engaging in restructuring efforts.
Modest expansions in new business, paired with another uptick in headcounts led to a twenty-fifth successive reduction in backlogs. Shortages of some key parts resulted in the weakest decline in backlogs for 17 months, however.
Finally, sentiment regarding output in the year ahead remained firmly in positive territory in June. Although, there were some signs that soaring inflation weighed slightly on hopes with the degree of optimism moderating from May.
