Economy
Business Activity Falls First Time in Eight Months
By Modupe Gbadeyanka
The Stanbic IBTC Purchasing Managers’ Index (PMI) for July 2024 has indicated that the Nigerian private sector moved back into contraction territory.
A statement from the lender disclosed that the index of the performance of the business environment closed at 49.2 points compared with 50.1 points recorded in June as steep price pressures hit demand and resulted in renewed reductions in both business activity and new orders.
Business Post reports that readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show deterioration, which occurred in the period under review, the first in eight months.
Input costs and selling prices continued to rise rapidly, although there were some signs that efforts to secure sales resulted in a softer pace of output price inflation.
The renewed worsening in the health of the private sector mainly reflected the first reductions in output and new orders since November last year. In both cases, rates of decline were only modest.
Anecdotal evidence continued to highlight the negative impact of sharp price increases on customer demand, with clients often unwilling or unable to commit to new projects.
Three of the four broad sectors covered by the report saw business activity decrease in July, the exception being manufacturing where production increased.
Selling prices continued to increase sharply at the start of the third quarter as companies passed higher input costs through to their customers. This was despite the rate of inflation easing to the slowest since May 2023 amid reports from some panellists that they had lowered charges as part of efforts to secure sales.
The Head of Equity Research for West Africa at Stanbic IBTC Bank, Mr Muyiwa Oni, said, “The Stanbic IBTC headline PMI declined for the second consecutive month to 49.2 points in July – its lowest level since November 2023.
“Anecdotal evidence continued to highlight the negative impact of sharp price increases on customer demand, resulting in renewed reductions in both business activity and new orders.
“Notably, output and new orders printed below 50.0 thereby ending a seven-month sequence of expansion and reinforcing a renewed worsening in the health of the private sector.
“Even as output and new orders declined, companies continued to expand their staffing levels during the month. Moreover, the rate of job creation picked up to the strongest in 2024 so far.
“Meanwhile, overall input prices continued to rise sharply in July with the rate of inflation quickening for the third month running and were the fastest since March.
“Although output prices continued to rise rapidly during July, the pace of inflation eased from that seen in June and was the slowest since May 2023. Where selling prices increased, panellists linked this to higher input costs.
“On the other hand, some companies lowered charges as part of efforts to attract customers. That said, companies remained confident overall that output will increase over the next 12 months, reflecting business expansion plans including efforts to start exporting and open more branches.
“On a year-on-year basis, headline inflation may have peaked 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, thereby likely supporting a slight improvement in domestic economic activities in H2:24.”
Further increases in purchase prices and staff costs were registered in July. Purchase price inflation quickened to a four-month high, often due to currency weakness but also higher raw material costs.
Meanwhile, the rise in employee expenses was broadly in line with that seen in June as companies continued to help workers with higher living costs, particularly those related to transportation.
The renewed decline in output was accompanied by a reduction in business confidence, with firms at their least optimistic since the survey began. That said, business expansion plans meant that firms still expected output to rise over the coming year.
Companies scaled back purchasing activity, with reduced demand for inputs and prompt payments helping lead to a further shortening of suppliers’ delivery times.
Meanwhile, stocks of inputs increased. Employment also continued to rise slightly, with the pace of job creation quickening to the fastest in 2024 so far. Higher staffing levels and a drop in new orders meant that backlogs of work were cleared for the second consecutive month.
By Adedapo Adesanya
President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.
Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.
At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.
In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.
Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.
“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”
The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.
Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.
He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.
“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.
“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.
By Aduragbemi Omiyale
The deadline for the recapitalisation of the Nigerian pension industry has been extended by six months to June 2027 from December 2026.
This extension was approved by the National Pension Commission (PenCom), the agency, which regulates the sector in the country.
Addressing newsmen on Thursday in Lagos, the Director-General of PenCom, Ms Omolola Oloworaran, explained that the shift in deadline was to give operators more time to boost the capital base, dismissing speculations that the exercise had been suspended.
“The recapitalisation has not been suspended. We have communicated the requirements to the Pension Fund Administrators (PFAs), and we expect every operator to be compliant by June 2027. Anyone who is not compliant by then will lose their licence,” Ms Oloworaran told journalists.
She added that, “From a regulatory standpoint, our major challenge is ensuring compliance. We are working with ICPC, labour and the TUC to ensure employers remit pension contributions for their employees.”
The DG noted that engagements with industry operators indicated broad acceptance of the policy, with many PFAs already taking steps to raise additional capital or explore mergers and acquisitions.
“You may see some mergers and acquisitions in the industry, but what is clear is that the recapitalisation exercise is on track and the industry agrees with us,” she stated.
PenCom wants the PFAs to increase their capital base and has created three categories, with the first consists operators with Assets Under Management of N500 billion and above. They are expected to have a minimum capital of N20 billion and one per cent of AUM above N500 billion.
The second category has PFAs with AUM below N500 billion, which must have at least N20 billion as capital base.
The last segment comprises special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30 billion, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20 billion.
By Adedapo Adesanya
Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Thursday, December 18.
According to data, Central Securities Clearing System (CSCS) Plc led the losers’ group after it slipped by N2.87 to N36.78 per share from N39.65 per share, Golden Capital Plc depreciated by 77 Kobo to end at N6.98 per unit versus the previous day’s N7.77 per unit, and FrieslandCampina Wamco Nigeria Plc dropped 19 Kobo to sell at N60.00 per share versus Wednesday’s closing price of N60.19 per share.
At the close of business, the market capitalisation lost N16.81 billion to finish at N2.147 billion compared with the preceding session’s N2.164 trillion, and the NASD Unlisted Security Index (NSI) declined by 24.76 points to 3,589.88 points from 3,614.64 points.
Yesterday, the volume of securities bought and sold increased by 49.3 per cent to 30.5 million units from 20.4 million units, the value of securities surged by 211.8 per cent to N225.1 million from N72.2 million, and the number of deals jumped by 33.3 per cent to 28 deals from 21 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
Similarly, InfraCredit Plc ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units traded for N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units exchanged for N524.9 million.
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