Nigeria: PMI dips in August
September 3, 2021
Private sector business conditions in Nigeria improved at a softer pace in August, with the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) dropping to 52.2 from the 18-month high of 55.4 in July. While the print marked the softest expansion since February, the index remained above the neutral 50-threshold that separates expansion from contraction in operating conditions.
The downtick came on the back of softer increases in output and new orders, despite firming domestic demand; greater price pressures weakened sales growth. In turn, output growth softened. In light of strengthening demand and continued growth in output, firms increased staff levels, which led to a notable reduction in outstanding work. Meanwhile, stocks of purchases rose at an accelerated pace as companies attempted to ensure sufficient materials in case of future supply shocks. Turning to prices, input costs rose on the back of higher raw material, commodity and staff costs, while a weakening currency added further upward pressure. To protect profit margins, output prices were raised. Sentiment, lastly, continued its downward trend, coming in at the third lowest in the series’ history, as the longer-term economic consequences of Covid-19 dragged on confidence.
Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank, commented:
“Although there have been no talks on increased restriction, the surge in [Covid-19] cases will continue to lower optimism for economic growth. […] However, we do not expect stringent public health restrictions as we saw in Q2 2020 in the near term, thus, expect the PMI to remain above 50 levels for the rest of the year.”
Author: Jan Lammersen, Economist