- In line with the increase in economic activity usually associated with festive season, Nigeria private sector PMI hit 52.7 in Dec from 49.6 in Nov, its biggest improvement since January 2024.
- While some firms increased employment in response to the higher new orders, others cut staff go due to difficulties paying wages.
- Purchase prices were up amid currency weakness and higher costs for fuel and transportation.
Nigeria private sector activity showed signs of improvement during the final month of 2024 attributable to trade associated with festive season spending, the latest Stanbic IBTC Bank Purchasing Managers’ Index (PMI) for December shows.
During the month, the overall business conditions in Africa’s largest economy improved as fresh orders increased for the second month running and renewed expansions were seen in output, employment and purchasing.
“In line with the increase in economic activity usually associated with festive season in Nigeria, the private sector activity moved above the 50-points psychological threshold for the first time in six months, settling higher at 52.7 in December from 49.6 in November – its most pronounced improvement since January 2024,” explained Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank.
“This improved private sector activity reflects renewed expansions in output, purchasing, and employment level… while some firms increased employment in response to the higher new orders, others reported having to let staff go due to difficulties paying wages.”
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Nigeria private sector expansion fastest in December 2024
New orders increased for the fourth time in the past five months, with the pace of expansion quickening to the fastest since May 2024.
Survey respondents noted improving client demand and rising customer numbers. Sustained growth of new orders led to a renewed expansion of business activity in December, thereby ending a five-month sequence of contraction.
All four broad sectors signalled rising output at the end of 2024. Companies also responded to higher new orders by recording fresh rises in both employment and purchasing activity. Growth of input buying helped firms to accumulate stocks of purchases for the first time in five months.
“Meanwhile, input prices remained elevated in December – prices increased across all four monitored sectors, with the most pronounced increase in the manufacturing sector. As a result, output prices also remained elevated in December and ticked higher from that seen in November,” added Muyiwa Oni.
Overall, companies were able to keep on top of workloads and depleted backlogs for the seventh month running, albeit marginally. Additionally, the survey shows that there were some signs of capacity pressures emerging in supply chains, however, with lead times shortening only fractionally and to the least extent since August 2023.
While prompt payments and competition among suppliers meant that lead times continued to shorten, poor road conditions and higher demand for inputs caused delays in some cases. Improving trends across the private sector were recorded in spite of ongoing strong inflationary pressures.
Purchase prices were up amid currency weakness and higher costs for fuel and transportation. Transportation price pressures also contributed to an increase in staff costs.
In turn, companies continued to increase their output prices at a rapid pace, with the rate of inflation quickening slightly from that seen in November. Although strengthening from the series low seen in the previous survey period, business confidence was still the third-lowest on record.
Business expansions
Some firms linked optimism to expected improvements in access to funding, helping them to invest in business expansions, while others were hopeful of an improvement in economic conditions in 2025, and a softening of inflationary pressures.
“We maintain our expectation that the broad economy is likely to maintain the Q3:24 growth momentum in Q4:24, supported by festive-induced increase in economic activity and sustained improvement in crude oil production. On balance, we estimate the economy to grow by 3.24 per cent y/y in real terms in Q4:24 and adjust our 2024 growth estimate upward to 3.2 per cent (previously: 3.1 per cent).
“Over the medium term, some firms were optimistic of improvements in access to funding, helping them to invest in business expansions, while others were hopeful of an improvement in economic conditions in 2025, and a softening of inflationary pressures.”
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