In a significant shift, Nigeria’s economic activity has taken a downturn for the first time in seven months, according to a freshly released Purchasing Managers’ Index (PMI) report by Stanbic IBTC Bank.
The most recent monthly PMI, unveiled on Wednesday, indicates a decline in the headline index, dropping from 51.1 in the prior month to 49.1 in October. In economic terms, readings above 50.0 are considered a sign of improvement, while readings below signify a deterioration.
The last instance of a business activity decrease in the country was in March, following the severe cash shortages resulting from the Central Bank of Nigeria’s naira redesign policy.
“The headline PMI dipped below the pivotal 50.0 mark for the first time in seven months in October, signaling a deterioration in private sector business conditions,” the report states.
At 49.1, the index reflects a slight worsening of operating conditions compared to September’s reading of 51.1.
The most pressing challenge for businesses in October was the most significant increase in overall input prices in nearly a decade. Purchase costs surged due to currency weakness and the lingering impacts of the fuel subsidy removal.
The PMI index, which evaluates private sector performance, is derived from a survey of 400 companies across various sectors. The index takes into account new orders, output, employment, suppliers’ delivery times, and stock of items purchased, with a focus on delivery times moving in a comparable direction.
May’s PMI index registered the highest growth this year at 54.0.
Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, attributed the pause in new business expansion to the inflationary environment, which depressed consumer demand in October.
The majority of respondents also reported an increase in purchase prices, primarily due to exchange rate weakness and higher fuel costs. The inflation rate reached a new peak in the survey’s history, with the Consumer Price Index rising to 26.72 percent in September from 25.8 percent in August.
