Data from the Stanbic IBTC Purchasing Managers Index (PMI) reveals that Nigeria’s manufacturers are grappling with the steepest rise in input costs in a decade, exacerbated by the worsening foreign exchange (FX) crisis.
The PMI report indicates that Nigeria’s manufacturers are facing unprecedented pressure on operational expenses due to factors such as high borrowing costs and subdued consumer spending.
In February, both input costs and output prices surged at record rates, significantly impacting demand, according to the report.
The surge in input costs during February was primarily driven by exchange rate weakness, which led to increased material costs and higher energy expenses. Manufacturers continue to face challenges in accessing FX, with significant disparities in rates between the official and parallel markets.
The report highlights that the overall increase in input costs in February was the most significant since the survey’s inception in January 2014, with approximately 78 percent of respondents reporting cost escalation.
As a consequence, the rates of expansion in output and new orders decelerated sharply, with employment contracting for the first time in ten months.
Business activity in February dropped to its lowest level since December 2023, with the headline index declining from 54.5 in January to 51 points. A reading above 50.0 indicates an improvement in business conditions.
The PMI index, which gauges private sector performance, is derived from a survey of 400 companies across various sectors, including agriculture, manufacturing, services, construction, and retail.
Additionally, output price inflation reached a fresh record high in February as firms transferred rising input costs to consumers. Price pressures acted as a deterrent to new orders, despite some positive signals for underlying demand.
Nigeria has been contending with double-digit annual inflation since 2016, with the consumer price index reaching 28.9 percent in December, according to the National Bureau of Statistics (NBS). Furthermore, growth in the manufacturing sector slowed to 1.4 percent in 2023, down from 2.45 percent in 2022. In the fourth quarter of 2023, manufacturing growth decelerated to 1.38 percent compared to the same period in 2022, indicating ongoing challenges in the sector.
