Nigeria: Business conditions improve at six-month soft pace in January
Operating conditions in Nigeria’s private sector economy continued to improve in January, albeit at a six-month soft pace as the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) dropped to 50.7 from 51.8 in December. However, the index remained above the neutral 50-theshold that separates an overall improvement from deterioration in business conditions.
The downtick at the start of the new year came on the back of easing growth in output and new orders as well as a marked drop in employment. New orders were driven by improving demand dynamics, which offset the negative impact of higher prices. Regarding prices, material shortages, a weakening currency, and higher wages put pressure on input costs. Increased input costs were passed onto customers, with output price inflation rising at the sharpest pace since August last year. Lastly, sentiment regarding output in the year ahead remained positive due to hopes of greater demand and business expansion plans; however, the coronavirus continued to drag on expectations.
Gbolahan Taiwo, economist at Stanbic IBTC Bank, commented:
“The Nigerian private sector has been faced with a barrage of challenges over the past year, mostly owing to the fall-out impact of the pandemic on the Nigerian economy. FX liquidity constraints have been a major bottleneck for manufacturers and that mixed with a significant depreciation of the currency, particularly in the parallel market have made the operating environment much tougher. On the other hand, consumer purchasing power has weakened significantly given stagnant wages, rising unemployment and higher inflation, impacting the pace of growth in output and new orders. “