By Aduragbemi Omiyale
Business activities in the private sector in Nigeria further suffered from the cash crisis in the country as the Stanbic IBTC Bank Purchasing Managers’ Index (PMI) showed a reading of 42.3 points in March 2023, in contrast to the 44.7 points reported in February 2023.
Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show deterioration.
The Central Bank of Nigeria (CBN) came up with a Naira redesign policy aimed at taming inflation, kidnapping, counterfeiting and vote-buying.
However, it battered the economy as many businesses suffered from the resultant cash crunch, forcing some state governments to convince the supreme court to reverse the policy.
In its latest report, Stanbic IBTC Bank said last month, Naira scarcity had a severe impact on business conditions as output and new orders fell more quickly than in February, while staffing levels and purchasing activity were scaled back again.
It further said while input costs and output prices continued to rise sharply, rates of inflation softened, with output prices increasing at the softest pace in almost three years, and suppliers’ delivery times shortening after having lengthened in February.
It was observed that the decline recorded in March was the most pronounced since the survey began in January 2014, apart from at the time of the outbreak of the COVID-19 pandemic in 2020.
As was the case in February, there were widespread reports from companies that customers were unable to commit to spending given cash shortages. This led to a substantial decline in new business, with the pace of contraction more pronounced than in the previous survey period. The same picture was seen with regard to business activity, which decreased at a rate only exceeded in April and May 2020.
All four broad sectors posted reductions in activity at the end of the first quarter. Companies reduced staffing levels slightly for the second month running, in part reflecting lower workloads but also due to difficulties paying wages. Lower workforce numbers limited the pace of staff cost inflation, which eased to a marginal rate that was the slowest since January 2021.
Stanbic IBTC Bank Purchasing activity was also scaled back, falling at the fastest pace since May 2020. In turn, inventory holdings also decreased. Inflationary pressures eased in March.
The pace at which purchase costs increased was the slowest in just under three years but remained sharp and faster than any seen prior to the pandemic.
The same picture was seen with regard to output prices, which rose at the slowest pace since April 2020. Suppliers’ delivery times shortened in March, following the first lengthening in more than five years during February.
Suppliers’ delivery times shortened in March, following the first lengthening in more than five years during February. Quicker deliveries reportedly reflected competition among suppliers.
The cash crisis acted to dampen confidence in the private sector in March, with sentiment the second lowest in the series’ history. Where output was predicted to rise, panellists linked this to investment intentions and business expansion plans.
