Nigeria’s PMI Rises to 52.7, Yet 2024 Business Outlook Hits Decade-Low

In a recent release of the Stanbic IBTC Purchasing Managers Index (PMI) for Nigeria, Infostride News brings encouraging news as the private sector showcased a rebound, recording a PMI of 52.7 in December. This marks a notable improvement from the 48.0 recorded in November, signifying a return to growth for the private sector. The positive momentum is deemed particularly significant, given the challenging macroeconomic conditions prevalent in the country.

The December 2023 PMI figure represents the highest level since June of the same year when the index stood at 53.2. Despite facing economic headwinds, the private sector has demonstrated resilience and adaptability.

According to the report, the improvement is attributed to a recovery in demand conditions, leading to a substantial upswing in new orders. This positive trend contrasts with the two consecutive declines observed in October and November. Business activity also rebounded, experiencing substantial growth during the month.

However, the report highlights sector-specific challenges, pointing to a continued decline in wholesale and retail activity. This indicates that while certain segments of the private sector are thriving, others are facing persistent challenges.

Both input price inflation and selling price inflation recorded a sharp increase in December. Despite this, the report underscores the significance of the surge in new orders, which played a pivotal role in mitigating the impact of inflation. The report quotes Muyiwa Oni, the Head of Equities Market Research at Stanbic IBTC, who noted the intense inflationary pressure but emphasized the positive shift in the PMI to expansion territory.

Oni remarked, “The headline PMI returned to expansion territory for the first time in three months in December 2023, posting 52.7 from 48.0 in November. Nevertheless, feedback from respondents continues to show intense inflationary pressure, with purchase costs and selling prices each rising at sharper rates than in November. We expect inflationary pressures to remain elevated in the near term.”

The report goes on to highlight additional positive indicators, such as job creation. In December, positive trends in new orders and business activity prompted companies to hire additional staff, extending the ongoing eight-month job creation sequence. Purchasing activity and inventory holdings also expanded. However, backlogs of work increased for the third time in the last four months, primarily due to challenges related to material costs, availability, and delays in customer payments.

Despite these improvements, the report notes a drop in business confidence for the new year. Business confidence has decreased for the second consecutive month, reaching a joint lowest level since the survey began in 2014. The report emphasizes that, despite the return to growth in December, confidence in the year-ahead outlook is waning.

“Despite the return to growth of activity in December, confidence in the year-ahead outlook continued to wane, easing for the second month running to the joint-lowest since the survey began in January 2014,” states the report.

In conclusion, while the private sector in Nigeria demonstrated resilience and positive momentum in December, challenges persist, and businesses remain cautious about the outlook for the coming year. Infostride News will continue to monitor and report on developments in Nigeria’s economic landscape.