Economic challenges in Nigeria continue to take a toll on businesses, as companies grapple with inflation and rising operational costs, leading many to downsize their workforce.
According to the latest Purchasing Managers Index (PMI) report by Stanbic IBTC, business activities in the private sector declined for the fifth consecutive month in November 2024. The headline PMI stood at 49.6, which was slightly better than October’s 46.9, but still below the 50.0 threshold that marks growth.
The sustained downturn in business conditions is largely attributed to weakened consumer demand amid escalating prices. With inflation impacting households and businesses, many companies across key sectors, including wholesale, retail, and services, have been forced to reduce purchasing activities and cut jobs.
The PMI report highlighted that the decline in business activity was less severe compared to the previous months, partly due to a modest rebound in new orders, which saw a slight increase after a sharp fall in October. While there were some signs of demand improving, the report noted that high prices remained a deterrent for customers, limiting the effectiveness of these improvements. The inflationary environment, combined with muted demand, meant that business activity continued to contract, marking the fifth consecutive month of decline. However, the pace of the decline was marginal in comparison to earlier months.
Sector-specific data showed a mixed picture: agriculture and manufacturing sectors experienced increased output, while the wholesale, retail, and services sectors faced declines. Purchase costs surged once again in November, driven by a weak currency, rising fuel costs, and higher raw materials prices. Although the pace of inflation slightly slowed from the previous month, it remained elevated, putting additional strain on businesses. Moreover, staff costs increased as companies tried to assist their employees with rising living and transportation costs.
Stanbic IBTC’s head of Equity Research, Muyiwa Oni, commented that while the Nigerian private sector experienced further deterioration in November, the decline was less pronounced compared to October. The modest rebound in new orders was the primary factor that softened the downturn. Oni also noted that new orders have risen in three of the past four months, though the latest growth was limited.
Looking forward, Oni expressed optimism for the economy’s performance in the fourth quarter of 2024, supported by an anticipated increase in economic activity due to the festive season and improvements in crude oil production. Based on the November PMI survey, companies reported tentative signs of demand recovery, although high prices continued to hold back full recovery.
On the whole, Stanbic IBTC revised its 2024 growth forecast upward to 3.2% from 3.1%, expecting the Nigerian economy to grow by 3.24% in real terms year-on-year in Q4, 2024. Despite the ongoing challenges, the forecasted growth indicates a potential stabilization, driven by seasonal factors and gradual improvements in key sectors.
