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Stanbic IBTC’s latest monthly Purchasing Managers’ Index (PMI), released last week, shows that the deterioration in performance of the country’s private sector eased in December 2016. The bank said Nigeria’s PMI reached 48.1 points in December, up from 47.7 points recorded in the previous month.

The December PMI is the highest level recorded since July last year, according to the report released in partnership with IHS Markit.

“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,” said Ayomide Mejabi, an Economist at Stanbic IBTC. “The headline PMI rose to its best level in the last five months, perhaps indicating that underlying macro-economic bottlenecks are being resolved.”

The Stanbic IBTC Nigeria PMI is based on five weighted indexes compiled from monthly questionnaires sent to purchasing executives in 400 private sector firms. The indexes are: new orders, output, employment, suppliers’ delivery times, and stock of items purchased. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

In the month under review,     the PMI report shows that Nigeria’s private sector recorded a slower decline in output, with panel members citing weaker underlying demand. Furthermore, new business orders also slowed as inflationary pressures weighed on consumer demand. As for employment, the report said the rate of job cuts were the fastest in the series history, despite being relatively moderate.

Nigerian businesses raised their output prices again in December citing exchange rate depreciation, rising delivery costs, and higher food prices as the main factors driving the inflation. Input buying among firms also decreased, with companies linking the fall to a lack of working capital. Finally, suppliers’ lead times shortened during the month although vendor performance improved marginally.

“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,” Mejabi said.