The continued rise in inflation has significantly impacted business operations in Nigeria, leading to stagnation in several sectors. This is reflected in the Purchasing Managers’ Index (PMI), which remains below the 50.0 points threshold, signaling deterioration in business conditions.
The PMI, which measures the operating environment of businesses, indicates whether conditions are improving or worsening. A reading above 50.0 suggests growth, while a reading below 50.0 indicates contraction. According to the Stanbic IBTC PMI report for November 2024, the PMI posted a reading of 49.6, slightly up from October’s 46.9, but still below the neutral 50.0 mark. This is the fifth consecutive month the PMI has remained in negative territory, showing that business conditions in Nigeria’s private sector continue to decline.
Factors such as rising prices of goods and services, alongside high unemployment, have contributed to the subdued business environment. The report highlights that companies continued to reduce their purchasing amid steep price pressures, leading to lower employment levels. While there were signs of improvement, with a slight uptick in new orders in November, high prices remained a significant deterrent for customers.
Despite these challenges, some sectors showed resilience. The agriculture and manufacturing sectors reported an increase in output, while the wholesale & retail and services sectors experienced declines. Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, noted that although business activity in November showed only a marginal decline compared to October, inflationary pressures, high energy costs, and raw material expenses continued to intensify price pressures, affecting overall business performance.