Despite the elevated inflationary environment, business activities in Nigeria rose for the first time in six months in December 2024 during the festive season.
According to the Stanbic IBTC Bank Nigeria Purchasing Manager Index released on Thursday, there was also a second successive increase in new orders and renewed expansions in output, employment, and purchasing.
In December, the headline PMI moved back above the 50.0 no-change mark for the first time in six months. At 52.7, the index was up from 49.6 in November and signalled a solid improvement in the health of the private sector, which was the most pronounced since January 2024.
Usually, PMI readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration. The Stanbic IBTC Bank Nigeria PMI is compiled by S&P Global 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. Data were first collected in January 2014.
Commenting on the current reading of the PMI, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “In line with the increase in economic activity usually associated with the 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.
“This improved private sector activity reflects renewed expansions in output, purchasing, and employment levels. New orders also increased for the second consecutive month, with the latest increase being the highest since May 2024, reflecting an improvement in consumer demand. Nonetheless, while some firms increased employment in response to the higher new orders, others reported having to let staff go due to difficulties paying wages.
“Elsewhere, output (54.8 points vs. November: 49.6) ended a five-month sequence of decline, with survey participants linking the rise in activity to increased customer numbers. Growth was recorded across each of the four broad sectors covered by the survey. 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.”
He asserted, “We maintain our expectation that the broad economy is likely to maintain the Q3:24 growth momentum in Q4:24, supported by a 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 year-on-year 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 about 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.”
In the month under review, new orders increased for the fourth time in the past five months, as the pace of expansion quickened at the fastest rate since May. The sustained growth of new orders led to a renewed expansion of business activity in December, thereby halting months of contraction.
Also, companies 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.
Firms were able to keep on top of workloads and depleted backlogs for the seventh month running, albeit marginally.
The report added that purchase prices went up amid the continued weakness of the naira 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,” the report concluded.
Despite the upsides, business confidence was still the third-lowest on record.
Some firms have 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.
