This emerged after the Central Bank of Nigeria (CBN) revealed that its Manufacturing PMI stood at 52 index points in December 2016, also indicating an expansion in the manufacturing sector during the review period. The central bank’s PMI index had recorded decline in the preceding eleven months.
Continuing, Stanbic IBTC explained that the headline figure was derived from its Purchasing Managers’ IndexTM (PMITM). Readings above 50.0 signalled 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. It therefore signalled 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.”
Furthermore, it stated that the main findings of the December survey were the weakening 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.
The latest survey data signalled a return to contraction territory for new business following a marginal increase in November. The fall was broad-based, as new export orders also lowered. Inflationary pressures weighed on consumer demand, according to several survey respondents. Meanwhile, firms continued to work through their outstanding business levels in December. Although the rate of deterioration eased to the slowest in four months, it remained strong in comparison to the three-year series average.
Job cuts in Nigeria’s private sector were evident for the second month in a row. In fact, the rate of job shedding was the fastest in the series history, despite being relatively moderate. Nigerian businesses raised output prices again in December. The rate of inflation was marked despite slowing since the previous month. Moreover, output charges rose at a stronger pace than input prices. Nigerian private sector firms commented on exchange rate depreciation, rising delivery costs and higher foods prices as the main factors driving inflation.
For the fifth time in as many months, input buying in the private sector of Nigeria decreased. The rate of decline was little-changed from November, with firms linking the fall to a lack of working capital. That said, pre-production inventories accumulated at a fractional rate in December.
Finally, suppliers’ lead times shortened in Nigeria’s private sector during the month. However, the rate at which vendor performance improved was only slight.