The Nigerian private sector remained in growth territory in September, although there were some signs of moderation as rates of expansion in output and new orders softened. Companies continued to expand purchasing activity and employment in line with higher new orders. Suppliers’ delivery times improved further amid a lack of road congestion.
Meanwhile, increased workforce numbers and sufficient capacity to fulfil new orders led to a series- record decline in the level of incomplete work. Looking forward, however, business sentiment was the weakest since the start of the survey in January 2014 as some firms reported difficulty planning for the year ahead.
On the price front, overall input price inflation was marked and was driven by increase in raw material costs and unfavourable exchange rates against the US dollar.
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.
At 52.5 in September, the headline seasonally adjusted PMI signalled expansion and one which extended the current sequence of strengthening business conditions to three months. That said, down from 54.6 in August, the reading pointed to a more moderate improvement.
Output and new orders rose sharply during September.
In both cases, firms attributed growth to improvements in customer demand following the easing of restrictions related to the coronavirus disease 2019 (COVID-19).
Higher workloads prompted firms to increase staffing levels which led to the fastest pace of job creation since February. The rise in workforce numbers paired with sufficient capacity led to a series-record depletion in the amount of outstanding business.
Higher purchase costs was the main factor behind strong overall inflationary pressures. Purchase price inflation was substantial following reports of unfavourable exchange rate movements.
Firms responded to improving customer demand by raising purchasing activity at a sharp pace.
Respondents also reported solid growth in stocks of purchases which was linked to planned increases in output levels. Prompt orders and quiet road conditions meant that input delivery times shortened to the greatest extent in almost two-and- a-half years.
Looking ahead, business confidence remained positive overall as firms continue to foresee a rise in output over the year ahead. That said, sentiment dropped to the lowest in the series so far amid reports that some firms were not planning to expand output at present.
Methodology
The Stanbic IBTC Bank Nigeria PMI® is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.
Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted data series.
About Stanbic IBTC Bank
Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings Plc, a full service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. Standard Bank Group, to which Stanbic IBTC Holdings belongs, is rooted in Africa with strategic representation in 20 key sub-Saharan countries and other emerging markets; Standard Bank has been in operation for over 151 years and is focused on building first-class on-the-ground banks in chosen countries in Africa and connecting other selected emerging markets to Africa and to each other.
