BUSINESS activities in the Nigerian private sector contracted again in November, stoked by the increasing inflationary pressure.
This indicates a five-month consecutive decline in business activities as the Nigerian headline inflation rose to 33.88 per cent in October from 32.70 per cent in September.
In its monthly Purchasing Managers’ Index (PMI) report released on Monday, December 2, Stanbic IBTC Bank indicated that the rates of inflation further hampering private business operations.
The report showed that private sector businesses remained at the contractionary level of 49.6 points in November, from 46.9 points in October, pointing to a marginal decline in business activities.
When the PMI reading is above 50.0 points, it signals an improvement in business conditions, but below 50.0 readings show a deterioration in business activity.
The Central Bank of Nigeria has been unable to tame inflation in the last year despite its orthodox approach.
The ICIR can report that the PMI started to deteriorate below the 50.0 no-change mark in July after inflation struck private sector business activities to negative territory.
In July, the PMI declined to 49.2 points from 50.1 in June. It remained contracted in August at 49.9 points, 49.8 points in September, and further down to 46.9 points in October.
According to the latest Stanbic IBTC report, the decline in PMI for the fifth consecutive month in November signalled a further deterioration in business conditions in the private sector.
It indicates that companies reported customers were often deterred by high prices as the inflationary environment and muted demand conditions meant that business activity continued to fall.
While sector data pointed to increases in output in agriculture and manufacturing but decreases in wholesale and retail and services, purchase costs rose rapidly again in November amid naira weakness and higher prices for fuel and raw materials as the pace of inflation remained elevated.
In response to increasing input costs, output prices rose further at a substantial pace midway through the final quarter of the year, the report showed.
The muted demand environment and high prices for inputs led companies to reduce both their purchasing activity and stocks of inputs in November.
The overall view was that business confidence continued to wane in November and hit a fresh record low as firms continued to hope for improvement.
“The Nigerian private sector activities deteriorated further in November, albeit at a less pronounced rate relative to October.
“This less pronounced deterioration was primarily due to the return to growth of new orders in November, after having decreased solidly in October,” the head of equity research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said.
He stressed that higher energy prices, increases in the cost of raw materials, and lingering currency weakness continue to lead to intensification of price pressures in November.
“Thus, input prices increased at a substantial rate again during November, with the pace of inflation only slightly lower than that seen in October and remaining one of the sharpest on record,” Oni added.