Despite Rising Prices, Nigeria’s Business Activity Expands in December 2023, Reveals Stanbic IBTC Bank’s PMI

The latest Purchasing Managers’ Index (PMI) by Stanbic IBTC Bank, released on Tuesday, indicates a noteworthy expansion in business activity in Nigeria for the first time in three months, despite the challenges of increasing prices. The headline index surged from 48.0 in November to 52.7 in December, marking a significant improvement and the highest reading in six months.

The PMI report revealed that May’s index at 54.0 represented the highest growth since the beginning of 2023. Purchasing costs and selling prices experienced sharper increases in December compared to November, reflecting inflationary pressures.

The private sector in Nigeria witnessed a return to growth in December, marked by increased output and new orders, signaling a recovery in demand. However, the report noted that business confidence dropped to the joint-lowest level in the decade-long survey, attributed to persistent inflationary pressure.

Despite the positive growth in December, the PMI report highlighted a diminishing confidence in the year-ahead outlook for the second consecutive month, reaching the joint-lowest level since the survey’s initiation in January 2014. The report authors mentioned that improvements in new orders and business activity encouraged companies to hire additional staff, extending the streak of job creation to eight months.

Purchasing activity and inventory holdings expanded, but backlogs of work increased due to challenges related to the cost and availability of materials and customer payment delays.

The headline PMI surpassed the 50.0 no-change mark for the first time in three months, registering 52.7 in December, indicating a robust improvement in the private sector’s health. The demand conditions showed signs of recovery, leading to a substantial increase in new orders and business activity, although wholesale and retail sectors continued to decline.

Stanbic IBTC Bank’s Muyiwa Oni commented on the report, noting that the return to expansion territory in December implies a strong improvement in the private sector’s health. Despite this positive development, respondents expressed concerns about intense inflationary pressure, with both purchase costs and selling prices rising at faster rates than in November. The expectation is that inflationary pressures will persist in the near term.

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