Nigeria: Operating conditions improve at softer pace in January
Private-sector operating conditions improved at a softer pace at the outset of the year, with the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) dropping to 53.7 in January from 56.4 in December. The reading marked a four-month low, but continued to signal improving business conditions as it remained above the neutral 50-threshold that separates expansion from contraction.
The headline downtick came on the back of softer growth in new orders, which increased at the weakest rate in one and a half years. Cash shortages and elevated price pressures dampened demand dynamics. Consequently, output growth eased in the month, but remained robust nonetheless. Further, supplier delivery times lengthened on the back of resurging Covid-19 cases and associated restrictions. Turning to prices, greater wage bills and higher prices for raw materials drove another uptick in input costs, with unfavorable exchange rate movements adding additional upward pressure. Hence, output prices rose, although the rate of inflation eased.
Analysts at the EIU added:
“We expect real GDP growth to rise from an estimated 3.0% in 2021 to 3.5% in 2022. […] A more stable foreign exchange market and lower inflation should also firm up household buying power and encourage fixed investment. This will be accompanied by direct Central Bank of Nigeria (CBN) lending schemes to channel funds to credit-hungry sectors such as agriculture and manufacturing, although both have deep-rooted shortcomings that will limit long-term productivity gains. These include power shortages, instability, a lack of formal land titling in agricultural areas and import restrictions.”