Stanbic IBTC Bank Purchasing Managers Index (PMI) revealed that the health of Nigeria’s private sector continued to deteriorate in the final month of 2016, although at the weakest rate since July.
The weakening contraction of Nigeria’s private sector stemmed from a slower decline in output, with panel members citing weaker underlying demand. Furthermore, business activity has decreased in every month since February.
According to the PMI report released by the bank, firms reported a slower decline in output and a marginal contraction in new business levels. Meanwhile, businesses continued to work through their backlogs, subsequently lowering headcounts at the sharpest pace in the survey’s three-year history.
“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 48.1 in December, up from November’s 47.7, the headline figure rose to a five-month high but remained below the crucial 50.0 no-change mark, thereby signalling a further contraction of
Nigeria’s private sector. Moreover, the latest figure lengthened the current downturn to eight successive months.
Commenting on December’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said, “The rate of contraction in Nigeria’s private sector slowed in December as a result of weaker declines in output and new export orders as well as a slower increase in output prices. The headline PMI rose to its best level in the last five months, perhaps indicating that underlying macro-economic bottlenecks are being resolved.
Having said that, most other facets of activity continue to deteriorate as new business orders returned to contraction territory. In addition, after recording marginal growth in October, employment extended its recent decline from November into December. The price PMI sub-indices on the other hand show that underlying inflationary pressures may be subsiding, as while output prices continue to increase, they are doing so at a slower pace compared to earlier in the year.
In summary, it is perhaps still too early to ascertain if a turnaround in Nigeria’s economic challenges is imminent as anecdotal evidence still suggests that many of the productive sectors continue to struggle with foreign exchange needed to boost domestic investment and consequently, growth.”