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‘Nigeria’s private sector downturn eases slightly in September’


A report from Stanbic IBTC Bank’s Purchasing Managers’ Index (PMI) has showed that Nigeria’s private sector downturn eased slightly in September, when compared to thatin August, 2016.

The report said: “The headline figure derived from the survey is the Purchasing Managers’ Index. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

“The seasonally adjusted Stanbic IBTC Bank Nigeria PMI picked up from August’s record low of 46.3 in September, but only slightly to 46.8.

That still pointed to a solid deterioration in business conditions, and was lower than any other reading except August’s. The average for the third quarter as a whole (47.3) was the lowest since data collection started in January 2014.”

According to the release, the figure is the second quickest in the series history, and also rounded off the worst quarterly performance since the survey began in 2014.

It stated that the previous month witnessed another steep decline in output as well as further reductions in new orders, employment and purchasing, while rising costs continued to squeeze firms’ margins, which ultimately resulted to an increase in charges from the firms.

The main findings of the survey, according to the report is that sharp contraction of activity represents a key factor behind the overall downturn, just as output fell for the eighth straight month amid further reports of weak client demand.

New business also declined in September, albeit at a much slower rate than the activity. The latest reduction was weaker than in August, but still faster than the 2016 average.

Lower exports continued to weigh on total new orders. New work from abroad has also fallen in each of the past nine months.

Furthermore, subdued demand led to a second successive reduction in purchasing activity at Nigerian private firms.

“Though only slight, the back-to-back decline contrasted with four straight months of growth from April to July. Input stocks also decreased, for just the third time in the series history.

“Job losses were meanwhile sustained in September, amid doubts about the demand outlook for the remainder of 2016. The fall was the second
in as many months, following 31 months of continuous hiring up until August. Backlogs of work were depleted regardless of a smaller workforce, with weak order books often resulting in spare capacity.

“Prices data pointed to ongoing pressure on margins. The rise in input prices reflected higher purchasing costs rather than salary growth, according to latest figures. Whereas purchase costs rose at the fastest pace since February in line with higher fuel and raw material prices, salaries fell for the first time in seven months as firms sought to cut costs.

“Subsequently, charges were raised at a marked pace. That said the rate of increased eased since the prior month, continuing the softer trend seen throughout the third quarter,” it added.

Commenting on the findings of the survey, an Economist at a bank, Ayomide Mejabi, said: “In September, the Stanbic IBTC Bank Nigeria PMI
indicated that while the contraction in business activities persisted, its pace eased marginally, reaching a seasonally adjusted 46.8 from
46.3 in August.

“However, the PMI suggests that economic activity may have worsened in the third quarter of the year, when compared to the first and second quarters where economic growth contracted by 0.4 per sent year on year and 2.1 per cent y/y respectively

“This worsening in business conditions in the third quarter occurred despite the introduction of reforms in the foreign exchange market aimed at improving the supply of foreign exchange in order to bolster domestic investment and consequently improve economic growth.

“The continued downturn in private sector activity as suggested by the PMI may be due to the fact that discovering USD/NGN prices in the
inter-bank market remains inefficient and may be limiting the pace and size of foreign portfolio inflows. In addition, the output prices index suggests that the underlying pressure on prices may be waning which could result in the pace of growth in headline inflation slowing,” it added.

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Stanbic IBTC Bank
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