A recent survey conducted by Stanbic IBTC Bank for October 2016 suggests that pressure on Nigeria’s private sector has been let up albeit marginally.
According to the bank’s report based on data compiled within from approximately 400 private sector companies, the latest data hinted at brighter near-term prospects for some companies.
The data collected between 12th and 27th of October showed that where the downturn in output remained steep, the rate of contraction in new work eased to the weakest in five months.
The report noted that with orders falling only modestly, job creation resumed after two months of decline. “Input stocks also rose following a reduction in September. On the price front, both input costs and output charges increased sharply.
The headline figure derived from the survey, which is represented by the Purchasing Managers’ Index (PMI) index climbed further clear of August’s record low in October, rising from 46.8 in September to 47.5. That pointed to only a moderate worsening in business conditions at Nigerian private sector firms. Notably, the latest figure was slightly higher than the average over the third quarter as a whole (47.3).” The report said.
Commenting on October’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said: “The Stanbic IBTC Bank PMI reading for October suggests that while the downturn in private sector business activity in Nigeria remains entrenched, the pace of deterioration appears to have eased marginally.
The improvement in the seasonally adjusted PMI to 47.5 in October from 46.8 in September shows that while output has continued to decline at a steep pace, there have been marginal improvements in areas such as employment, new orders and inventory levels.
Furthermore, the input and output price PMI sub-indices suggest that while prices continue to rise, they are now rising at a slower pace. Indeed, this could mean that for the rest of 2016, headline inflation would continue to push higher at a much more contained rate.
That said, the risks to the inflation forecast remain skewed to the upside due to potentially increased pressures feeding through from the widening gap between the parallel and inter-bank market FX rates. On the whole, although the recent PMI reading potentially indicates a more positive near-term outlook, such an optimistic outcome is unlikely to be sustainably anchored unless the pace of restoring policy credibility picks up.”
Specifically, the October survey recorded that, Lower output remained a prominent drag on the headline index in October.
The rate of decline accelerated since the prior month, and was the second-strongest in the series history behind only that seen in August. Some panellists reported falling client demand, while others indicated that they had been unable to afford materials due to rising costs.
New business however fell at a substantially slower pace than output in October. The report said, the rate of contraction slowed to the least marked since May and was only modest overall. Data suggested that much of this easing was driven by domestic sales, as new orders from abroad dropped to the greatest extent in the survey’s history.
Also, for the first time in three months, Nigerian private sector employment increased in October. The pace of hiring was only slight, however. With staffing levels returning to growth and new orders still in decline, companies were able to work through backlogs of work.
Purchasing activity decreased only fractionally at the start of the fourth quarter. The latest reduction was the slowest in the current three-month period of decline. Stocks of inputs meanwhile increased, reversing a fall in
September. That said, the rate of expansion was only slight.
Cost pressures eased in October, but nevertheless remained marked overall. Panellists frequently reported higher transportation and commodity prices. Charges continued to rise sharply as a result. The rate of inflation slowed for the fourth straight month to its lowest since January, but was still strong in the context of historical data.”