Businesses battle renewed inflationary pressure despite marginal PMI uptick
Nigeria’s Purchasing Managers’ Index (PMI) saw a marginal uptick in August, rising from 49.2 to 49.9, signalling a slight improvement in business conditions. However, renewed inflationary pressure and other sectoral problems continue to hinder the growth of businesses.
According to Stanbic IBTC Purchasing Managers’ Index for August 2024, which revealed that business conditions in the month remained relatively stable, it revealed that business conditions in the organised private sector remained largely unchanged in the month under review.
It noted that while there was a slight uptick in new orders, the growth rate was modest and did not lead to an increase in overall business activity, which experienced a slight decline.
Despite this, the report noted that employment levels continued to rise as companies processed outstanding business more efficiently. Furthermore, input costs surged once again midway through Q3, with the rate of purchase cost inflation reaching a five-month high due to rising prices for materials and transportation, which was further intensified by currency depreciation.
In response to escalating living costs, businesses raised staff wages, contributing to higher overall costs. These increased input costs were frequently passed on to customers, leading to the most significant rise in output prices in five months.
The report also noted that a combination of sharply rising material costs and subdued demand prompted firms to cut back on purchasing activities, resulting in a decrease in input stocks for the first time in 17 months.
Excluding the COVID-19 pandemic period, the report observed that this reduction in inventories was among the most pronounced on record. Meanwhile, supplier lead times continued to improve.
Businesses reporting renewed inflationary pressures contrasts with the inflation report in July which revealed that inflation for the month slowed to just over 33 per cent, the first time in 19 months, since December 2022. Further, firms reporting increases in staff salaries reveal a reaction to the new minimum wage law which was signed into law earlier in July.
MEANWHILE, the country’s non-oil export sector recorded $2.7 billion in the first half of this year, driven by rising demand for locally made products in the face of the weakening naira. The naira has significantly weakened and lost value when compared to the dollar or cefa used by neighbouring countries.
This figure represents a 6.26 per cent increase from the $2.53 billion recorded in the same period in 2023. Executive Director/CEO, Nigerian Export Promotion Council (NEPC), Nonye Ayeni, noted that the growth was due to increased demand for Made-in-Nigeria products and initiatives embarked on at the council to reawaken the consciousness of Nigerians on the need to imbibe an export culture.
Speaking further on the exported items, Ayeni revealed that 211 different products were exported during the period in review, with cocoa beans, urea/fertilizer and sesame seeds leading the pack, contributing 23.18 per cent, 13.78 per cent and 11.04 per cent of the total non-oil exports, respectively. This, she said, indicates a move from traditional agricultural commodities to more semi-processed and manufactured goods.
The total volume of exported products reached 3.83 million metric tonnes, reinforcing the assertion that the non-oil sector is key to revitalising Nigeria’s economy. The exported products reached 122 countries across Africa, the Americas, Asia, Europe and Oceania, with the Netherlands, Malaysia, and Brazil being the top three destinations by value.
Notably, Ghana was the only African country among the top 15 global importers of Nigerian products. The majority of non-oil exports, 95.08 per cent, were routed through seaports, with the South-West and South-South regions accounting for over 95 per cent of the total exports.
