Severe inflationary pressures caused an intensification of the downturn in the Nigerian private sector at the start of the final quarter of the year. Overall input costs rose at one of the sharpest rates on record, with selling prices increased accordingly. This resulted in marked reductions in new orders and business activity, while business sentiment was the lowest in the survey’s history. More positively, firms increased their staffing levels marginally despite the drop in workloads.
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 dropped to 46.9 in October from 49.8 in September, and signalled a marked deterioration in business conditions that was the most pronounced since March 2023.
Central to the worsening business environment in October was an intensification of already-strong inflationary pressures. Overall input prices surged higher, with the latest rise the third-fastest in the survey’s history.
A steep increase in purchase costs reflected currency weakness and higher prices for fuel and transportation. Meanwhile, efforts to help workers with rising living costs meant that staff pay was increased to the greatest extent in seven months.
Faced with sharply rising input costs, Nigerian companies increased their own selling prices rapidly too. The rate of charge inflation was the fastest since March and fourth- strongest on record.
Steep price rises had a severe impact on customer demand, and new orders declined for the first time in three months. Moreover, the rate of contraction was the sharpest since March 2023.
Business activity also decreased to the largest extent in 19 months, with only the agriculture sector bucking the wider trend to record a rise in output.
Sharp falls in output and new orders dented business confidence in October, with sentiment falling to the lowest on record.
Companies continued to increase their staffing levels, however, raising employment for the sixth month running, albeit modestly. Some firms took on staff on a short-term basis to make sure work was finished on time, but others reduced workforce numbers amid cost pressures.
Price pressures meanwhile contributed to a reduction in purchasing activity, with firms scaling back their input buying in response to falling client demand. The marked fall in purchasing was the most pronounced since March 2023. In turn, stocks of inputs also decreased, and for the third month running.
Finally, weak demand for inputs, competition among suppliers and prompt payments meant that lead times on the delivery of inputs continued to shorten.
