In October, the Nigerian business environment recorded the least activity in the past 19 months due to the high input cost and the weakness of the naira, FIJ has learnt.
This conclusion was drawn in the monthly Purchasing Managers Index Reports, published by the Stanbic IBTC Investment arm on Friday.
According to the report, business conditions took a hit and PMI dipped from 49.8 in September to 46.9, marking the steepest decline since early 2023.
For context, a PMI reading above 50 indicates growth in business activity. Conversely, a reading below 50 indicates contraction, suggesting deterioration consequent to an economic downturn.
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The slowdown is reportedly driven by currency pressures, higher fuel prices and increasing cost of transportation. As the cost of production plummets, businesses are forced to increase prices. The report stated that the cost led to a reduction in new orders and business activity.
Most importantly, confidence in the business sector plummeted to the worst ever since the organisation started documenting PMI in 2014.
“Overall input costs rose at one of the sharpest rates on record, with selling prices increased accordingly. This resulted in marked reductions in new orders and business activity, while business sentiment was the lowest in the survey’s history,” the report read in part.
Interestingly, though, some companies managed to add a few new hires, extending a six-month trend of job creation, according to the report.
However, with many feeling the pinch of the costs, firms are employing staff on a short-term basis. The report also stated that companies are making efforts, now more than ever, to help their staff stay afloat in the current economic situation.
“Meanwhile, efforts to help workers with rising living costs meant that staff pay was increased to the greatest extent in seven months,” the report added.
Metrics like the private sector output, volume of orders, and quantities of purchases made by customers all recorded steeper values than they did in September.
Prices, cost of staff maintenance and input prices, on the other hand, recorded very sharp increases, with some metrics posting record hikes since March 2023.
Recent data measuring economic health by the National Bureau of Statistics corroborate the analysis documented in this report. As far as Inflation is concerned, Nigeria took steps backwards from the progress it had recorded in August, moving from 32.15% headline inflation rate to 32.70%.
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The average retail price of petrol, considering the Dangote-NNPC-Marketers controversy, has also moved up by about 24.08%, according to the NBS.
FIJ reported how the cost of a healthy diet skyrocketed from N1,225 in August to N1,346 on average in September.
Businesses and individuals have also had to spend more on transport. The NBS recorded an increase in the average commute within and between cities in September.
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