Companies in Nigeria continued to be negatively impacted by strong inflationary pressures in November, with new orders and output both falling as customers were either reluctant or unable to pay higher charges. Purchase prices rose at the fastest pace in almost two years amid exchange rate weakness and higher costs for fuel and materials.
The headline figure derived from the survey is the Stanbic IBTC Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 48.0 in November, down from 49.1 in October, the headline PMI remained below the 50.0 no-change mark for the second month running midway through the final quarter of the year. The index signalled a modest deterioration in business conditions, and one that was the most marked since the cash crisis in the opening quarter of the year.
The overall decline in operating conditions was in large part driven by further reductions in output and new orders. Both fell for the second month running, and to greater extents than in October. Activity decreased particularly strongly at wholesale & retail companies, while agriculture was the only sector that posted an increase in output. The declines in output and new orders generally reflected steep price rises and the impact these had on customer demand. Companies raised their selling prices rapidly again in November, with the rate of inflation slowing only slightly and remaining among the strongest on record. Close to half of all respondents raised their charges during the month.
The rise in selling prices was in response to higher input costs. Purchase price inflation quickened to a near two-year high on the back of exchange rate weakness and higher costs for fuel and materials. Wages also increased as companies looked to help staff with higher living and transportation costs. Although business activity decreased again in November, firms continued to expand their staffing levels. Employment increased for the seventh month running, albeit modestly and to a lesser extent than in October.
Purchasing activity, meanwhile, was broadly unchanged following a fall in the previous survey period. Meanwhile, a reduction in activity meant that fewer inputs were needed than had been expected, resulting in a further build-up of stocks of purchases. Reduced demand for inputs, prompt payments and competition among suppliers meant that vendor lead times continued to shorten. Moreover, the rate of improvement hit a one-and-ahalf year high. Worries about the impact of inflationary pressures on demand caused business confidence to fall to the weakest since July’s record low. That said, business investment and plans to open new plants supported optimism that output.