
Business conditions in the Nigerian private sector were broadly stagnant in August. Although new orders returned to growth, the rate of expansion was only modest and insufficient to result in a rise in business activity, which fell fractionally. Employment continued to increase, however, as firms worked through outstanding business at a faster pace.
Companies continued to contend with sharply rising input costs, with the rate of inflation quickening since July. In turn, firms increased their own selling prices at a faster pace.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI ticked up to 49.9 in August from 49.2 in July, but remained just below the 50.0 no-change mark and signalled a broadly stable picture for business conditions in the Nigerian private sector.
The stagnation in overall operating conditions was in line with the trend in business activity, which decreased fractionally for the second consecutive month. Companies reported that demand remained muted amid strong inflationary pressures, but there were some signs of encouragement as new orders returned to growth.
New business was up slightly, reversing a decline seen in July. That said, the pace of expansion was much softer than the series average. New business rose across three of the four monitored sectors, the exception being services.
Employment also increased, extending the current sequence of job creation to four months. Although modest, the latest rise in staffing levels was the fastest since last November.
Rising staffing levels and muted new order inflows meant that firms were able to deplete their backlogs of work at the joint-fastest pace since June 2022.
Input costs rose rapidly again midway through the third quarter. The rate of purchase cost inflation hit a five- month high amid increases in prices for materials and transportation, with cost pressures exacerbated by currency weakness. Staff costs were also up as firms increased pay in response to higher living costs.
Higher input costs were often passed on to customers, and output prices subsequently increased at the sharpest pace in five months.
Sharply rising material costs and muted demand led firms to scale back purchasing activity, while stocks of inputs decreased for the first time in 17 months. Moreover, the reduction in inventories was one of the sharpest on record, if COVID-19 pandemic months are excluded. Meanwhile, supplier lead times continued to shorten.
Business expansion plans meant that companies were optimistic that output will increase over the coming year. Although rising from July’s record low, sentiment remained among the least optimistic since the survey began.