Business activity in Nigeria hit a seven-month low in June 2024, according to the latest Purchasing Managers’ Index (PMI) from Stanbic IBTC Bank. The headline index dropped to 50.1 from 52.1 in May. Readings above 50.0 indicate an improvement in business conditions, while those below suggest deterioration.
Thank you for reading this post, don't forget to subscribe!“June data signalled a broad stagnation of the Nigerian private sector as subdued demand and intense price pressures led to slowdowns in growth of output and new orders. In turn, employment rose only fractionally,” the report stated.
The report highlighted increasing inflationary pressures, with purchase prices, staff costs, and selling charges all rising faster than in May.
“Although new orders continued to rise in June, the rate of expansion was only marginal and the weakest in the current seven-month period of growth. There were some reports of underlying demand improving, but sharp price rises meant that customers faced challenges being able to commit to new projects,” it added.
The PMI index, which assesses private sector performance, is based on a survey of 400 companies across agriculture, manufacturing, services, construction, and retail sectors. It is a composite index derived from five individual indexes: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent), and stock of items purchased (10 percent), with the delivery times index inverted to align directionally.
Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank, noted, “The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in growth of output and new orders.”
Oni pointed out that new orders saw near-stagnation, with new business increasing only marginally at the slowest pace in the seven-month expansion sequence. “Financial challenges at customers reportedly limited the ability of firms to fully benefit from any improvement in underlying demand. In line with the picture for new orders, output rose at a slower pace during June, settling at its weakest level in four months,” he added.