Growth in the Nigerian private sector gained momentum in May to 54.4 basis points, with business conditions improving to the greatest extent in nine months.
The Purchasing Managers’ Index (PMI) was up from 52.9 in April to 54.4 in May. The headline PMI registered a rate of growth that was the sharpest since last August, and extended the current sequence of expansion to 11 months.
The headline figure derived from the survey is the PMI, carried out by Stanbic IBTC Bank with readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The report stated that, “the stronger improvement in the health of the private sector was centred on a robust rise in new orders, with the rate of growth the strongest since last August. Exports meanwhile rose at the fastest pace since February 2020.”
It pointed out that, “with new business up sharply, firms increased output levels for the sixth month in succession. The latest uptick was the strongest in the aforementioned sequence and in line with the series average.
“Sub-sector PMI readings indicated manufacturers saw the fastest rise, followed by agriculture, services and wholesale & retail, respectively. Meanwhile, larger output requirements encouraged increases in buying activity and inventory holdings.”
To cater for growing demand, firms sought to increase their headcounts. The rate of expansion was solid, and reached a 35-month high in May. Rising staffing levels allowed firms to complete orders in a timely manner with backlogs falling at the third-quickest rate in the survey to date.”
Economist at Stanbic IBTC Bank, Gbolahan Taiwo, stated that, “the Nigerian private sector business environment continues to show strong signs of improvement in May as the PMI rose to 54.4, the highest print in nine months.”
According to Taiwo, for one, the easing of stringent public health restrictions since the second quarter of last year continues to pave the way for some level of broad macro-economic recovery this year.
He added that, “this is very much in alignment with persistent recovery we have seen in the PMI numbers since last year. We think that the Nigerian economy will grow by 3.1 per cent Y-o-Y this year, partly helped by lower base effects occasioned by the contraction during the second and third quarters of 2020.
“Inflation remain high and as the recent PMI series suggest, both input and output prices have been on the rise. This potentially could impact the recovery in aggregate demand and purchasing power of the consumer, in light of sticky wages.”