Rising inflation and currency instability have led to a significant downturn in business activities in Nigeria, as reported in the August 2023 Purchasing Managers’ Index (PMI).
Stanbic IBTC Bank’s latest monthly PMI report, published in August 2023, unveiled a drop in the headline index from 51.7 in the prior month to 50.2, marking the lowest point in five months. A reading above 50.0 traditionally indicates improving business conditions, while anything below suggests a decline.
The PMI report highlights a contraction in Nigeria’s private sector business activity, driven by mounting and persistent price pressures that have curtailed demand. These pressures have resulted from escalating inflation, driven partly by the removal of fuel subsidies, along with the vulnerability of the national currency. Additionally, soaring transportation expenses have caused delays in supplier deliveries.
This downturn has been particularly challenging for companies, as they struggle to secure new orders amidst steep price hikes. August witnessed only a marginal rise in new business, with the pace of expansion being the slowest in the last five months. Employment also showed modest growth during this period. Furthermore, business activity experienced a slight dip in the middle of the third quarter, ending a four-month phase of expansion, with wholesale and retail sectors witnessing a decline, and the services sector remaining unchanged.