Stanbic IBTC Bank Nigeria PMI® Downturn deepens in March

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The cash crisis in Nigeria continued to have a severe impact on business conditions in the private sector during March. In fact, output and new orders fell more quickly than in February, while staffing levels and purchasing activity were scaled back again. While input costs and output prices continued to rise sharply, rates of inflation softened. Output prices increased at the softest pace in almost three years. Meanwhile, suppliers’ delivery times shortened after having lengthened in February. The headline figure derived from the survey is the Stanbic IBTC Bank Purchasing Managers’ Index™ (PMI®).

Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration. The headline PMI posted 42.3 in March from 44.7 in February, moving further below the 50.0 no-change mark and signaling a sharper deterioration in business conditions in the Nigerian private sector. The decline was the most pronounced since the survey began in January 2014, apart from at the time of the outbreak of the COVID-19 pandemic in 2020.

As was the case in February, there were widespread reports from companies that customers were unable to commit to spending given cash shortages. This led to a substantial decline in new business, with the pace of contraction more pronounced than in the previous survey period. The same picture was seen with regard to business activity, which decreased at a rate only exceeded in April and May 2020.

All four broad sectors posted reductions in activity at the end of the first quarter. Companies reduced staffing levels slightly for the second month running, in part reflecting lower workloads but also due to difficulties paying wages. Lower workforce numbers limited the pace of staff cost inflation, which eased to a marginal rate that was the slowest since January 2021.

Stanbic IBTC Bank Purchasing activity was also scaled back, falling at the fastest pace since May 2020. In turn, inventory holdings also decreased. Inflationary pressures eased in March. The pace at which purchase costs increased was the slowest in just under three years but remained sharp and faster than any seen prior to the pandemic. The same picture was seen with regard to output prices, which rose at the slowest pace since April 2020. Suppliers’ delivery times shortened in March, following the first lengthening in more than five years during February.

Suppliers’ delivery times shortened in March, following the first lengthening in more than five years during February. Quicker deliveries reportedly reflected competition among suppliers. The cash crisis acted to dampen confidence in the private sector in March, with sentiment the second[1]lowest in the series’ history. Where output was predicted to rise, panelists linked this to investment intentions and business expansion plans.

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