Menu

Stanbic IBTC Nigeria released its monthly Purchasing Managers’ Index (PMI) today, stating that the country’s private sector downturn deepened in August compared with the previous month.

The bank said its Nigeria PMI fell to 46.3 points in August from 48.8 points in the previous month due mainly to subdued underlying demand that resulted in lower output.

“After a modest deterioration in business conditions in July, the Stanbic IBTC Bank PMI for August signalled a faster contraction reaching a survey record low of 46.3,” said Ayomide Mejabi, an Economist at Stanbic IBTC Bank. “The brief relief experienced in July was probably a result of improved market sentiment following the introduction of reforms in the foreign exchange market, which were aimed at attracting foreign capital flows that are needed to boost domestic investment.”

Stanbic IBTC said the PMI for August represented the sixth month that the index has fallen below 50 in the past seven months. (Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration).

“The PMI readings for July and August suggest that the economic contraction experienced in the first half of the year may still have some way to go as the foreign exchange market struggles to clear out the FX backlog overhang. The effects of the continued FX supply-demand imbalance appeared to be anecdotally confirmed by the output PMI index which fell to its lowest in the history of the survey,” Mejabi said.

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.

In August, new orders fell for the fourth consecutive month, while employment rose marginally for the first time in eight months. There was a renewed decline in purchasing activity during the month under review, although inventory building showed a sustained increase. With salaries and purchasing costs rising again, overall input prices increased solidly during August.

“The substantial number of survey respondents who reported a downturn in output due to weakening demand and the weakening naira suggests that it could take a while before conditions improve,” Mejabi said. “The slowing pace of increase in the output prices PMI index suggests that inflation may have eased in August.”