Customer demand improved again in the private sector at the end of last year, supporting further rapid increases in new orders and business activity, the Purchasing manager’s Index (PMI) report has shown.
It said naira weakness added to cost pressures as the strong demand led to fastest rise in new orders in eight months.
In turn, firms took on more staff, albeit only slightly.
Meanwhile, currency weakness continued to exacerbate cost pressures, subsequently feeding through to the second-fastest rise in selling prices since the survey began in 2014.
“The headline figure derived from the survey is the Purchasing Managers’ Index. Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration,” it said.
The headline PMI reached 54.6 last December, up from 54.3 the previous month and signalling a marked monthly improvement in business conditions across the private sector. Moreover, operating conditions strengthened to the greatest extent since last April.
It said the rate of growth in new orders quickened to an eight-month high in December, linked by firms to stronger customer demand. With customer numbers and new orders rising, firms also increased their business activity at a sharper pace at the end of last year.
“Output rose across each of the agriculture, manufacturing, wholesale and retail and services sectors. Improvements in demand were sustained despite ongoing strong inflationary pressures. In particular, purchase costs increased at the fastest pace in four months amid rising prices for fuel and raw materials, exacerbated by currency weakness. In turn, companies increased their own selling prices at a much faster pace, and one that was only surpassed by that seen in December 2021,” the report said.
It said policies to help staff with higher living costs, particularly those related to transportation, as well as efforts to motivate staff led firms to raise salaries solidly again. Companies also increased employment levels to try to alleviate some pressure on existing staff members, though workforce numbers were up only slightly overall.
Purchasing rose sharply again, but the rate of accumulation in inventories softened to a 22-month low amid cost pressures and the use of inputs to support output.
Meanwhile, suppliers’ delivery times shortened to the least extent since July 2022. While prompt payments and competition among vendors led deliveries to speed up, fuel scarcity reportedly caused delays in some cases.
It added that business confidence remained relatively muted, rising from November’s series low but still the second- weakest on record. Those firms that expressed optimism linked this to planned investment and business expansions.
The Governor, Central Bank of Nigeria (CBN), Godwin Emefiele, had last year, lamented rising spate of inflation and the impact of foreign exchange shortage on achieving national development goals.
During the 13th Bankers’ Committee Retreat in Lagos, he said Nigeria’s 21.09 per cent inflation rate in October was relatively high and at an unacceptable level.
The inflation rate has since exceeded the six to nine per cent target set by the apex bank, with the rise attributed to the uptick in price of Automotive Gas Oil (AGO), increase in electricity tariff, intermittent scarcity of petrol and foreign exchange scarcity.
October inflation rate in Nigeria was the 10th consecutive monthly increase and the highest inflation level in 17 years.
Emefiele who spoke on the theme: “Increasing the Productive Base of the Nigerian Economy and Non-Oil Export Revenues,” said there was need to review, reconsider and recalibrate the strategies for Nigeria’s economic prosperity.
He said inflation in Ghana in October surged to 40.4 per cent, while the rates in Ethiopia and Rwanda surpassed 30 per cent as of last October. Inflation in other Emerging and Developing Economies (EMDES) like Turkey and Argentina exceeded 80 per cent in October.
He therefore therefore sought the need to recognise the hindrances of high inflation and foreign exchange shortages on the achievement of Nigeria’s national development goals.
He said the need to support the fundamentals of the Nigerian economy, diversify from dependence on oil inflows, and minimize the debilitating pressures in the foreign exchange market that the Central Bank of Nigeria launched the RT200 programme in February 2022.
