Economy
Business Conditions in Nigeria Deteriorate Further as PMI Sinks
Inflationary pressures intensified in September, adding to the challenges faced by Nigerian companies as the third quarter drew to a close.
Although new orders increased for a second month running, the rate of growth remained muted and insufficient to prevent a further reduction in business activity.
Likewise, the rate of job creation was only marginal and eased to a three-month low.
The headline figure derived from the survey is the Stanbic IBTC Purchasing Managers’ Index (PMI). Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.
Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank commented: “Nigeria’s PMI remained below the 50-point mark for the third consecutive month, settling at 49.8 points in September from 49.9 points in August.
“This points to a further fractional deterioration in business conditions, the third in as many months, largely due to challenging demand conditions amid the inflationary environment.
“Still, the pace of deterioration remained marginal as some firms were able to secure greater new business during the month. Output increased in agriculture and manufacturing, but fell in wholesale & retail and services.
“Meanwhile, companies remained reluctant to hold inventories in September, cutting stocks of purchases for the second month running and to the largest extent since May 2020.
“Inventories were reduced in line with falling output and muted customer demand. Elsewhere, input costs increased to their third steepest on record while output prices quickened to their fastest level in six months.
“Business activity was underwhelming in Q3:24 relative to Q2:24, implying that the non-oil sector may grow slowly in Q3:24 amid the triple whammy of high inflation rate, elevated interest rates, and currency volatility all of which continue to undermine domestic demand and business investments.
“However, because of higher crude oil production relative to the same period last year, the oil sector is likely to compensate for a lacklustre non-oil sector’s performance, thereby pushing real GDP growth to 3.10% y/y in Q3:24, based on our estimates.”
The headline PMI was little changed in September, posting 49.8 following a reading of 49.9 in August. As such, the index pointed to a further fractional deterioration in business conditions, the third in as many months.
Companies continued to report challenging demand conditions, in large part due to the inflation environment.
In fact, September saw an intensification of inflationary pressures, with both input costs and output prices increasing at the sharpest rates in six months. Purchase prices rose rapidly amid currency weakness and higher costs for fuel, logistics, materials, and transportation.
Some firms made efforts to help their workers with higher living costs, but the rate of wage inflation eased to an 18-month low. Higher costs were then passed through to customers, with close to 49% of respondents raising selling prices in September.
Although sharp price increases acted to limit customer demand, new orders rose for the second month running in September, and to a slightly greater extent than in August. However, the rate of expansion remained modest.
Business activity continued to fall marginally as the tentative improvement in new orders was insufficient to support an expansion of output. Activity was down for the third month running. Output rose in agriculture and manufacturing, but fell in wholesale & retail and services.
Employment increased for the fifth month running, but only marginally as some firms limited hiring in an effort to reduce costs. Companies also maintained a cautious approach to inventory levels, lowering stocks of inputs for the second month running, and to the largest extent since May 2020.
Firms were also reportedly keen to eliminate backlogs of work wherever possible given the cost of holding goods. The fall in inventories was recorded despite a renewed increase in purchasing activity, the first in three months.
Meanwhile, suppliers’ delivery times continued to shorten solidly. Business confidence fell in September and was the second-lowest on record, only just above the series nadir posted in July. Those respondents who were optimistic regarding the year ahead outlook linked this to hopes that business conditions will improve, alongside business expansion plans.
By Adedapo Adesanya
The United Arab Emirates has announced its decision to quit the Organisation of the Petroleum Exporting Countries (OPEC) to focus on national interests.
This dealt a heavy blow to the oil-exporting group at a time when the US-Israel war on Iran had caused a historic energy shock and rattled the global economy.
The move, which will take effect on May 1, 2026, reflects “the UAE’s long-term strategic and economic vision and evolving energy profile”, a statement carried by state media said on Tuesday.
“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all,” it added. “However, the time has come to focus our efforts on what our national interest dictates.”
The loss of the UAE, a longstanding OPEC member, could create disarray and weaken the oil cartel, which has usually sought to show a united front despite internal disagreements over a range of issues from geopolitics to production quotas.
UAE Energy Minister Suhail Mohamed al-Mazrouei said the decision was taken after a careful look at the regional power’s energy strategies.
“This is a policy decision. It has been done after a careful look at current and future policies related to the level of production,” the minister said.
OPEC’s Gulf producers have already been struggling to ship exports through the Strait of Hormuz, a narrow chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas supplies normally pass, because of threats and attacks against vessels during the war.
The UAE had been a member of OPEC first through its emirate of Abu Dhabi in 1967 and later when it became its own country in 1971.
The oil cartel, based in Vienna, has seen some of its market power wane as the US has increased its production of crude oil in recent years.
Additionally, the UAE and Saudi Arabia have increasingly competed over economic issues and regional politics, particularly in the Red Sea area.
The two countries had joined a coalition to fight against Yemen’s Iran-backed Houthis in 2015. However, that coalition broke down into recriminations in late December when Saudi Arabia bombed what it described as a weapons shipment bound for Yemeni separatists backed by the UAE.
By Adedapo Adesanya
Central Securities Clearing System (CSCS) Plc bested four price decliners on the NASD Over-the-Counter (OTC) Securities Exchange on Monday, April 27. The alternative stock market opened the week bullish during the session with a 0.03 per cent uptick.
According to data, the security depository company added N2.61 to its share price to close at N76.26 per unit compared with the preceding session’s N78.87 per unit.
As a result, the market capitalisation of the platform increased by N820 million to N2.425 trillion from N2.424 trillion, and the NASD Unlisted Security Index (NSI) gained 1.38 points to finish at 4,053.97 points compared with the 4,052.58 points it ended last Friday.
The four price losers were led by NASD Plc, which slumped by N3.80 to sell at N34.70 per share versus N38.50 per share. FrieslandCampina Wamco Nigeria Plc fell by N1.45 to N98.10 per unit from N99.55 per unit, Food Concepts Plc slid by 27 Kobo to N2.43 per share from N2.70 per share, and Geo-Fluids Plc dipped by 9 Kobo to N2.91 per unit from N3.00 per unit.
The value of securities transacted by market participants went down by 82.0 per cent to N7.4 million from N41.3 million units, the volume of securities declined by 28.5 per cent to 319,831 units from 447,403 units, and the number of deals dropped by 34.1 per cent to 29 deals from 44 deals.
Great Nigeria Insurance (GNI) Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 59.6 million units sold for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Also, GNI Plc was the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Resourcery Plc with 1.1 billion units traded for N415.7 million, and Infrastructure Guarantee Credit Plc with a turnover of 400 million units worth N1.2 billion.
By Adedapo Adesanya
The first trading day of the week in the currency market was bearish for the Naira in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, April 27.
Yesterday, it lost N5.80 or 0.43 per cent against the United States Dollar to trade at N1,364.24/$1, in contrast to the N1,358.44/$1 it was traded last Friday.
In the same vein, the Nigerian currency depreciated against the Pound Sterling in the official market by N13.70 to close at N1,847.72/£1 versus the preceding session’s N1,834.02/£1, and slumped against the Euro by N11.56 to sell at N1,602.29/€1 versus N1,590.73/€1.
Also, the Nigerian Naira tumbled against the greenback during the trading day by N5 to quote at N1,385/$1 compared with the previous rate of N1,380/$1, and at the GTBank FX desk, it traded flat at N1,370/$1.
The poor performance of the domestic currency could be attributed to liquidity shortage at the official currency market on Monday, which came amid surging demand for international payments. At $76.50 million, interbank liquidity printed higher across 79 deals, up from the $43.572 million reported on Friday.
Nigeria’s gross external reserves declined to $48.45 billion amid a month-long decline in inflows, amid uncertainties in the global commodity market. The depletion of foreign reserves could be partly attributed to the Central Bank of Nigeria’s intervention in the FX market.
The market remains perturbed by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market, while boosters, including oil prices, continue to look rocky due to stalled discussions and unclear ceasefire negotiations between the US and Iran.
A look at the cryptocurrency market, Bitcoin (BTC) has been rejected near $79,000 three times in eight sessions, leaving the level as the de facto ceiling of its current trading range even as major cryptocurrencies trade lower over the past day. It lost 0.9 per cent to sell at $77,003.61.
Analysts say that upcoming US Federal Reserve policy decisions and top tech firms’ earnings this week could provide the catalyst to push bitcoin decisively above $80,000.
The market also continued to weigh Iran’s interim deal proposal to reopen the Strait of Hormuz, which failed to advance over the weekend. The White House said US officials were discussing the latest Iranian proposal but maintained “red lines” on any deal to end the eight-week war.
Solana (SOL) dropped 1.8 per cent to $84.25, Ripple (XRP) went down by 1.6 per cent to $1.39, Ethereum (ETH) depreciated by 1.3 per cent to $2,290.00, Binance Coin (BNB) declined by 0.5 per cent to $625.18, and Cardano (ADA) fell by 0.2 per cent to $0.2480.
However, Dogecoin (DOGE) rose by 2.0 per cent to $0.1002, and TRON (TRX) appreciated by 0.2 per cent to $0.3242, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
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