Business Conditions in Nigeria Show Improvement
By Aduragbemi Omiyale
The Purchasing Managers’ Index (PMI) of Stanbic IBTC Bank Plc has shown that in February 2021, there was another modest expansion in the Nigerian private sector.
In a statement from the lender, it was disclosed that the growth was buoyed by a solid increase in new orders and output as companies continue to expand their purchasing activity and resumed hiring efforts during the month.
The report indicated that signs of spare capacity were again evident, with a fresh record reduction in backlogs registered.
However, unfavourable exchange rate movements, higher material costs and a rise in wages added to strong inflationary pressures with overall input prices increasing at a record pace.
Stanbic IBTC said headline PMI registered at 52.0 in February, up from 50.7 in January, indicative of a stronger improvement in overall business conditions. New order inflows rose sharply, with the pace of growth accelerating during the month.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
The improving demand environment supported growth in output which was solid and extended the period of expansion to three months. Despite the continuation of coronavirus disease 2019 (COVID-19) restrictions in foreign markets, exports rose during the month, with foreign demand for Nigerian goods and services showing signs of improvement.
To support higher output volumes, companies added to their purchasing activity for the eighth month in succession.
Consequently, firms raised their inventory holdings in anticipation of greater output in the months ahead. Vendor performance also improved, although the degree at which lead times shortened eased to the softest in nine months.
Elsewhere, further signs of spare capacity were signalled, with backlogs falling at the most marked rate in the series.
Nonetheless, firms added to their workforces, with employment rising marginally. The rate of overall input price inflation quickened to the strongest in the series, largely reflecting higher purchase costs.
According to panellists, higher material costs and unfavourable exchange rate movements contributed to a sharp uptick.
However, the stronger demand environment allowed firms to pass on higher prices, with charges rising substantially. Looking ahead, sentiment regarding output over the next 12 months reached a ten-month high as business expansion plans fuelled positive expectations.
That said, the degree of optimism remained below the long-run series average suggesting pandemic uncertainty weighed slightly on hopes for the future.