- Nigeria’s November PMI rose to 49.6 from 46.9 in October, marking its fifth consecutive month beneath the impartial 50.0 threshold.
- This studying alerts an ongoing deterioration in enterprise situations in Africa’s greatest economic system.
- Rising vitality costs, costly uncooked supplies, and a weak naira continued to drive substantial enter worth inflation.
Nigeria’s personal sector confirmed tentative indicators of enchancment in November 2024, as inflationary pressures eased barely. Nonetheless, steep worth will increase and subdued demand continued to choke companies, pushing many to chop jobs and scale back buying exercise.
The headline Buying Managers’ Index (PMI) rose to 49.6 from 46.9 in October, marking its fifth consecutive month beneath the impartial 50.0 threshold. This studying alerts an ongoing deterioration in enterprise situations in Africa’s greatest economic system, albeit at a slower tempo.
“This much less pronounced deterioration was primarily because of the return to development of latest orders in November,” mentioned Muyiwa Oni, Head of Fairness Analysis West Africa at Stanbic IBTC Financial institution.
Persistent inflation damps Nigeria’s personal sector restoration
Regardless of a modest uptick in new orders, excessive prices remained a big barrier to stronger restoration. Rising vitality costs, costly uncooked supplies, and a weak naira continued to drive substantial enter worth inflation. Although barely decrease than October’s peak, November’s inflation charge remained one of many highest on document.
“Some panellists noticed indicators of demand choosing up, however others reported that top prices once more acted to discourage prospects,” Oni famous.
The inflationary atmosphere not solely hampered buyer buying energy but additionally drove up operational prices for companies. Firms confronted heightened workers bills as they sought to cushion employees in opposition to rising dwelling and transportation prices, additional compounding monetary strains.
Sectoral disparities spotlight uneven development
Nigeria’s personal sector efficiency different throughout industries, with agriculture and manufacturing posting modest output features. In distinction, the wholesale, retail, and providers sectors skilled declines throughout the month, reflecting the uneven nature of the restoration.
In the meantime, Nigeria’s non-oil sector recorded year-on-year development of three.37 per cent in Q3 2024, up from 2.8 per cent within the earlier quarter. Key development drivers included ICT, finance and insurance coverage, commerce, street transport, and agriculture.
Nonetheless, these features have carried out little to offset broader weaknesses skilled throughout the economic system. Excessive enter prices, sluggish demand, and ongoing inflationary pressures weighed closely on companies’ skill to increase operations or rent further workers.
Learn additionally: Nigeria’s commerce exercise dips in September as rising inflationary stress bites
Job cuts and diminished buying mark November
In response to mounting challenges, lots of Nigeria’s personal sector companies scaled again on staffing and buying exercise, the survey exhibits. November marked the tip of a six-month streak of job creation, with employment falling marginally, significantly within the providers sector.
The tempo of discount was solely marginal, nonetheless, as the general fall in staffing ranges was restricted to only providers corporations, the PMI report notes partially.
Muted demand and elevated costs additionally led to reductions in buying exercise and inventory ranges. Firms reported a scarcity of capability pressures, with backlogs of labor declining and provider supply occasions bettering. These dynamics underscore the cautious method many corporations are adopting as they navigate financial uncertainties.
Nigeria enterprise confidence hits document low in November
The difficult atmosphere has dampened enterprise confidence, which fell to a brand new document low in November. Whereas some corporations remained optimistic about future output, citing enlargement and funding plans, the general sentiment stays subdued.
Excessive inflation and foreign money instability have tempered expectations for a swift restoration, leaving companies to grapple with a chronic interval of uncertainty.
Coverage implications and outlook
The modest enchancment in November underscores the resilience of Nigeria’s personal sector but additionally highlights the urgent want for structural reforms to deal with inflation and stimulate demand.
Policymakers should prioritize measures to stabilize the naira, curb inflation, and decrease manufacturing prices to create a extra conducive atmosphere for companies. Within the absence of such interventions, the personal sector’s restoration is prone to stay fragile, with vital implications for employment and financial development.
As Nigeria’s personal sector enters the ultimate month of 2024, the combined alerts paint a posh image. Whereas slight features in demand present a glimmer of hope, persistent inflation and excessive prices threaten to stall broader progress. For companies and policymakers alike, the problem lies in turning these tentative indicators of restoration into sustainable development.
Oni said; “We count on the economic system to keep up the Q3:24 development momentum in This autumn:24, supported by festive-induced enhance in financial exercise and sustained enchancment in crude oil manufacturing. Certainly, primarily based on the November PMI survey outcomes, firms reported some tentative indicators of demand bettering though some prospects have been deterred by excessive costs. On steadiness, we estimate the economic system to develop by 3.24 per cent y/y in actual phrases in This autumn:24 and modify our 2024 development estimate upward to three.2% (beforehand: 3.1 per cent).”
