Nigeria Sees Modest Expansion in Private Sector Activity in September- PMI
Nigeria sees a modest expansion in private sector activity in the month of September, according to Stanbic IBTC Bank purchasing manager index release today, a little change above record achieved in the month of August.
According to the report, the private sector concluded the third quarter of 2021 with a modest expansion in business conditions, adding that quicker uplifts were seen in new orders, employment and stocks of purchases, but output growth moderated for the second month running.
Nevertheless, the report hinted that optimism improved to a seven-month high.
It explains that material scarcity and unfavourable exchange rate movements exerted upward pressures on costs, however, leading to a record rate of purchase price inflation. Subsequently, this fed through to a steep rise in selling prices.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI registered at 52.3 in September, little changed from 52.2 in August, and indicative of a fifteenth consecutive monthly expansion. Central to the improvement was a solid and accelerated rise in new orders, which panellists mostly linked to the securing of new clients.
Contrary to the improvement in domestic sales, exports fell, and at the quickest rate since December amid persisting international COVID-19 restrictions. Nevertheless, to meet demand firms increased their output levels, but the pace of expansion was only modest and much softer than the rate of new order growth.
Cash and material shortages reportedly hindered some firms’ ability to raise output. All four of the monitored sub-sectors recorded expansions, with manufacturers seeing the strongest uplift, followed by wholesale & retail, services and agriculture, respectively. Firms raised their buying activity sharply in September.
Anecdotal evidence suggested efforts to mitigate against future supply and price shocks led to stockpiling. As a result, stocks of purchases rose at the fastest rate since October 2020. Meanwhile, vendor performance benefitted from quieter road conditions and advance payments.
Furthermore, suppliers’ delivery times have improved to the greatest extent since last December. Higher raw material and commodity costs as well as unfavourable naira-dollar exchange rate movements led to a substantial increase in input expenses. In fact, purchase costs rose at the quickest rate in nearly eight years of data collection.
Firms were able to pass on part of the increase to clients however, with charge inflation the second-strongest in the series to date. Finally, after moderating in August, sentiment improved to a seven-month high amid plans to increase marketing, open more stores and broaden product offerings.
Commenting on the report, Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank said, “The Stanbic IBTC PMI marginally increased to 52.3 in September from 52.2 in August. FX liquidity pressures continue to impact purchase prices and consequently output prices. This is well seen in the m/m inflation numbers.
“Indeed, month on month inflation rate increased slightly to 1.02% in August compared to the 0.93% recorded in July. We also observed that the imported food index has been trending upward, albeit stickily, as in January it was at 16.01% year on year, and 17.12% year on year by August.
“This may be due to the exchange rate adjustments this year and the resultant impact. An interesting insight from the PMI report is the ‘new export orders index’ recorded the quickest rate of decline since December.
“In recent months, we have seen a declining trend in oil production levels which could be capping the expected impact of higher oil prices on oil revenue. Sure, we saw that production averaged 1.41mbpd in the first 6 months of the year but since the end of June, production has consistently fallen, reaching 1.27mbpd in August.
“Increasing reports of vandalism and pipeline sabotage puts downside risk on oil production in the short to medium term. However, the likely increase in investments in the Oil and Gas sector following the signing of PIA into Law could drive production growth over the medium to longer term.
“Notably, the Nigerian private sector activity remained strong with the index registering a score above 50.0 for the 15th consecutive month, a trend we expect to continue for the rest of the year given the lax public health restrictions and gradual improvement in economic activities.”
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Nigeria Sees Modest Expansion in Private Sector Activity in September- PMI
