Business Conditions in Nigeria Strengthen as PMI Rises to 54.5

By Aduragbemi Omiyale

The health of the private sector in Nigeria recorded a solid improvement in January 2024 despite rising inflation and foreign exchange (FX) supply constraints, the Purchasing Managers’ Index (PMI) of Stanbic IBTC has revealed.

In the period under review, business conditions further strengthened for the second month running after reaching 54.5 points from the 52.7 points recorded in the preceding month.

The recovery in the Nigerian private sector was consolidated amid a sharp expansion in output and new orders. Purchasing activity also increased markedly, but difficulties paying staff meant that the rate of job creation eased, contributing to a rise in backlogs of work.

The recovery in new orders which began in December gathered momentum in January amid reports from panellists of strengthening demand. New business increased sharply and to the largest degree since April 2022.

Business activity also rose for the second successive month in January and at the fastest pace in 21 months.

All four broad sectors covered by the survey posted improvements in output. In turn, companies also expanded their purchasing activity at a sharp pace, with stocks of inputs up accordingly.

Firms were helped in their efforts to secure inputs by quicker deliveries from suppliers. Shorter lead times reflected good relationships with vendors, prompt payments and quiet traffic conditions.

The accumulation in stocks of purchases in part reflected plans for further improvements in output in the coming months.

Companies remained optimistic that output would increase over the year ahead and were more confident than in December.

Bucking the wider trend of a strengthening recovery, employment increased at a softer pace in January amid some reports that firms had faced challenges paying staff. This contributed to a second successive monthly rise in outstanding business. Backlogs increased slightly but at a faster pace than in December. Rates of inflation remained elevated in January but showed some signs of easing.

Purchase prices rose at the softest pace in eight months, but currency weakness and higher costs for fuel and raw materials meant that inflation remained elevated.

The rate at which staff costs increased was broadly unchanged from December as firms helped workers with higher living costs, particularly those related to transportation.

Matching the trend for input prices, the rate of output charge inflation remained elevated but eased to an eight-month low at the start of 2024.