Constrained by some micro and macroeconomic factors, Nigeria’s private sector growth was sustained for the sixth consecutive month in July, albeit at a slower pace as the Purchasing Manager’s Index (PMI) marginally declined to 52.5 in the month from 53.4 in June.
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI), compiled by S&P Global, indicated that while the reading marked the slowest expansion in three months, it remained above the 50-point threshold, indicating continued improvement in business conditions of the economy.
According to the PMI data, businesses recorded sharp rise in new orders as respondents attributed the increase to improved customer demand, the introduction of new products, and more competitive pricing strategies.
As expected, the sustained increase in new business translated into higher output but then production growth moderated to its weakest pace since January with Agriculture and manufacturing recording the strongest output gains, while Services and Wholesale and retail trade recorded slight expansions.
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The companies also continued to engage more workforce in response to rising demand, but employment growth eased to a three-month low.
Similarly, businesses increased purchases of raw materials and other inputs to meet current orders and prepare for future operations just as their inventories also rose during the month. But then, some companies complained about logistical challenges which delayed project completion, thereby causing a slight increase in outstanding work amid efforts to expand capacity.
The PMI further reflected some easing in inflationary pressures with the input cost inflation of businesses slowing to its weakest level in five months as purchase prices rose at a softer pace. Even then, many companies continued to speak about higher fuel, raw material and labour costs in the month under review.
As expected, the ease in cost pressures was transferred to customers, with companies raising selling prices at the weakest pace since February. Agriculture recorded the fastest increase in selling prices, while services experienced the slowest rate of price inflation.
Commenting on the survey’s findings, Head of Equity Research for West Africa at Stanbic IBTC Bank, Muyiwa Oni, noted that stronger customer demand continued to underpin business activity despite the moderation in the headline PMI.
He clarified that Nigerian businesses reported improved customer demand in July, while better pricing and new product launches also helped them to capture new orders arising from the increase in demand, adding that the businesses also increased input purchases to meet existing demand and prepare for future business activity.
According to him, the moderation in input costs aligns with Nigeria’s recent inflation trend. Headline inflation eased marginally to 15.91 percent year-on-year in June from 15.93 percent in May, ending three consecutive months of increases.
The researcher projected a rise in the headline inflation on a month-on-month basis in July, but that the annual rate is likely to further ease to about 15.72 percent, aided largely by favourable base effects.
Meanwhile, Stanbic IBTC has retained its forecast of 4.1 percent growth for the country this year hinged on its oil sector growth of 3.45 percent and non-oil sector expansion of 4.11 percent projections
