By Modupe Gbadeyanka
Strong inflationary pressures in November further negatively impacted companies in Nigeria, with new orders and output both falling as customers were either reluctant or unable to pay higher charges.
Purchase prices rose at the fastest pace in almost two years amid exchange rate weakness and higher costs for fuel and materials.
According to the latest Purchasing Managers’ Index (PMI) from Stanbic IBTC, business conditions remained under pressure, scoring 48.0 points last month compared with the 49.1 points it garnered in October 2023.
Readings above 50.0 signal an improvement in business conditions, while readings below 50.0 show deterioration.
It was disclosed that in the period under review, the overall decline in operating conditions was in large part driven by further reductions in output and new orders. Both fell for the second month running, and to greater extents than in October.
Activity decreased particularly strongly at wholesale & retail companies, while agriculture was the only sector that posted an increase in output. The declines in output and new orders generally reflected steep price rises and the impact these had on customer demand. Companies raised their selling prices rapidly again in November, with the rate of inflation slowing only slightly and remaining among the strongest on record. Close to half of all respondents raised their charges during the month.
The rise in selling prices was in response to higher input costs. Purchase price inflation quickened to a near two-year high on the back of exchange rate weakness and higher costs for fuel and materials. Wages also increased as companies looked to help staff with higher living and transportation costs. Although business activity decreased again in November, firms continued to expand their staffing levels. Employment increased for the seventh month running, albeit modestly and to a lesser extent than in October.
Purchasing activity, meanwhile, was broadly unchanged following a fall in the previous survey period. Meanwhile, a reduction in activity meant that fewer inputs were needed than had been expected, resulting in a further build-up of stocks of purchases.
Reduced demand for inputs, prompt payments and competition among suppliers meant that vendor lead times continued to shorten. Moreover, the rate of improvement hit a one-and-a-half-year high.
Worries about the impact of inflationary pressures on demand caused business confidence to fall to the weakest since July’s record low. That said, business investment and plans to open new plants supported optimism that output.
