Modupe Gbadeyanka
By Modupe Gbadeyanka
Growth in the Nigerian private sector was stunted by steep price pressures in July, as the citizens struggled with growing hardships triggered by the removal of fuel subsidy and the devaluation of the Naira by the federal government.
The Purchasing Managers’ Index (PMI) readings of Stanbic IBTC Bank showed that last month, the sector scored 51.7 points, lower than the 53.2 points achieved in June.
However, it was the fourth month running that the index has remained above the 50.0 mark, signalling a further improvement in business conditions in the Nigerian private sector during the month.
The lender said overall input costs rose at a pace unsurpassed in more than nine-and-a-half years of data collection, with selling prices up rapidly in response.
Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway.
Meanwhile, business confidence hit a new low.
There was more positive news on the employment front, however, as the rate of job creation quickened to the fastest since January.
It stated that the softer improvement in the health of the private sector reflected trends in output and new orders during July.
In both cases, rates of growth eased to the weakest since the respective returns to expansion following the cash crisis at the start of the year.
While some firms reported having been able to secure new contracts amid rising customer numbers, others highlighted the negative impact on demand of rising prices. July data signalled a steep increase in overall input prices, with the rate of inflation the joint-fastest since the series began in January 2014, equal to that posted in November 2021.
Purchase costs were a key driver of overall input price inflation. Higher fuel costs following the subsidy removal and currency weakness were the main factors leading purchase prices to rise.
Meanwhile, staff cost inflation hit a six-month high as firms increased pay to help staff deal with rising transport costs. With input costs up rapidly, companies increased their output prices accordingly and at one of the strongest rates on record.
More than half of companies increased their charges over the month. More positively, employment increased for the third month running in July, and at a solid pace that was the fastest since the start of the year.
Backlogs of work continued to rise, however, as some firms reported delays while checks were made to make sure customers were able to pay for orders. Input buying and stocks of purchases rose further, but rates of increase softened.
Finally, business confidence continued to trend downwards in July and was the lowest in just over nine-and-a-half years of data collection.
