Business
Stanbic IBTC Bank Nigeria PMI® Report: Surge in Selling Prices Amid Currency Weakness
Stanbic IBTC Bank Nigeria PMI® Report: Surge in Selling Prices Amid Currency Weakness
In the dynamic landscape of the Nigerian private sector, the repercussions of currency devaluation were once again palpable in the month of March. The latest data from the Stanbic IBTC Bank Nigeria PMI® survey revealed a remarkable escalation in purchase costs, propelling companies to elevate their selling prices at an unprecedented pace. While business activity witnessed a modest uptick in growth, the surge in prices exerted pressure on demand, leading to a moderation in the pace of new order expansion, which reached a four-month low. Notably, employment levels experienced a decline for the second consecutive month. Central to this survey is the Purchasing Managers’ Index™ (PMI®), a key metric indicating the health of the private sector.
A PMI reading above 50.0 signifies an improvement in business conditions compared to the previous month, whereas a reading below 50.0 indicates a deterioration. In March, the headline PMI held steady at 51.0, marking its joint-lowest level in four months. This figure suggests a marginal enhancement in business conditions during the period, albeit at a rate softer than the historical trend. The persistent inflationary pressures in March were primarily driven by the soaring purchase prices, which hit a new all-time high for the second consecutive month, largely attributed to currency depreciation.
Additionally, reports surfaced regarding elevated transportation costs, further exacerbating the cost burden on businesses. In response to the escalating cost of living, companies raised employee remuneration, resulting in the sharpest uptick in staff costs since November of the previous year. Corresponding to the trend in purchase costs, the rate of output price inflation also reached its peak since the inception of the survey in January 2014, with nearly 69% of respondents hiking their prices during the month. The substantial price increments posed challenges for firms in securing new orders, as clients grappled with the inflated costs.
Despite a fourth consecutive month of growth in new business, some firms noted a heightened client interest, albeit at a slower pace compared to the preceding months. The expansion in business activity marginally accelerated from February, though it remained relatively subdued. Growth was observed across various sectors including agriculture, manufacturing, wholesale & retail, and services. While output and new orders continued to climb, a slight decline in staffing levels was witnessed due to employee resignations for the second month running. Notably, purchasing activity rebounded following a contraction in the previous survey period, driven by efforts to meet burgeoning order demands promptly.
The sustained growth in inventories was attributed to increased input buying to fulfill new order requirements. Nonetheless, backlogs of work increased amid rising material costs and delays in customer payments. Suppliers’ delivery times shortened, partly due to subdued demand for inputs and timely payments. Although confidence in the year-ahead business outlook improved from the previous month’s record low, it remained relatively fragile as the first quarter drew to a close.
In conclusion, the latest Stanbic IBTC Bank Nigeria PMI® report underscores the significant challenges faced by businesses in the wake of escalating costs and currency fluctuations. While there are pockets of growth and resilience in the private sector, the prevailing economic conditions continue to pose hurdles to sustained expansion and profitability. Monitoring these trends and adapting strategies to navigate the evolving landscape will be crucial for businesses to thrive in the current environment.
