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PMI Report: Nigerian Businesses Struggle with Sharp Price Increases

October 2, 2024

PMI Report: Nigerian Businesses Struggle with Sharp Price Increases

Business activity in Nigeria has fallen for the second consecutive month, as the country grapples with escalating inflationary pressures that have led to the sharpest rise in prices in half a year. According to the latest Purchasing Managers Index (PMI) released by Stanbic IBTC Bank on Wednesday, the headline index dipped to 49.8 in September from 49.9 in August. A PMI reading below 50.0 indicates a deterioration in business conditions, while readings above 50.0 signal improvement.

The report highlights a growing sense of pessimism among Nigerian businesses. “Business confidence fell in September and was the second lowest on record, only just above the series nadir posted in July,” the report stated. This declining confidence is a reflection of the challenging economic environment, marked by weakening demand and rising operational costs.

Inflationary Pressures Intensify

September witnessed an intensification of inflationary pressures, adding to the challenges faced by companies as the third quarter came to a close. Both input costs and output prices increased at the fastest rates seen in six months. “Purchase prices rose rapidly amid currency weakness and higher costs for fuel, logistics, materials, and transportation,” the report noted.

The depreciation of the Nigerian naira has made imports more expensive, directly impacting the cost of raw materials and goods. Fuel prices have also surged due to the removal of subsidies and global oil price fluctuations. These factors have combined to push up production costs for businesses across various sectors.

Wage Inflation Eases Despite Rising Living Costs

Interestingly, while companies are facing higher operating costs, the rate of wage inflation has eased to an 18-month low. “Some firms made efforts to help their workers with higher living costs, but the rate of wage inflation eased,” the report said. This suggests that while businesses are sympathetic to their employees’ financial strains, they are limited in their ability to raise wages due to the challenging economic climate.

Challenging Demand Conditions Persist

The high inflation environment has led to subdued consumer spending, as individuals grapple with higher prices for goods and services. The report disclosed that companies continued to report challenging demand conditions, largely attributed to the inflationary environment. Reduced consumer purchasing power means that businesses are selling less, further compounding their financial pressures.

Outlook and Recommendations

The persistent decline in business activity underscores the urgent need for policy interventions to stabilize the economy. Experts suggest that the government should focus on measures to control inflation, strengthen the naira, and improve the ease of doing business. This could include fiscal policies aimed at reducing import dependency, investing in local production, and addressing supply chain inefficiencies.

Businesses, on their part, may need to explore cost-saving strategies, diversify their supply chains, and adopt technology to improve efficiency. Collaboration between the public and private sectors is essential to navigate these challenging times and set the economy back on a growth trajectory.

Social Media Reactions:

@AdaObi: “Inflation is eating deep into our economy. Businesses are struggling, and so are the people. 😞 #NigeriaEconomy”
@TundeWrites: “Another drop in the PMI. We need urgent economic reforms to stabilize our business environment! 📉 #BusinessNigeria”
@KemiLovesNigeria: “Prices are skyrocketing, yet wages aren’t keeping up. How are people supposed to survive? 😔 #Inflation”
@ChukwuemekaEze: “The falling naira is causing so many issues. Time for the government to step in and make some changes! 💱 #Naira”
@FatimaSpeaks: “Small businesses are the backbone of our economy. We need to support them during these tough times. 🛍️ #SupportLocal”
@OluTechGuru: “Maybe it’s time for businesses to leverage technology to cut costs and improve efficiency. 🤖 #Innovation”
@NgoziEconomist: “The PMI dropping below 50 is a bad sign. Consumer demand is low because people can’t afford basic goods! #Economy”
@DavidOkoye: “High operational costs are killing businesses. Fuel, transportation, materials—all going up! 🚚💸 #CostOfDoingBusiness”
@AmakaJournalist: “Wage inflation easing while living costs rise? Workers are getting squeezed from all sides. 💔 #WorkersRights”
@SaniNorthernStar: “Inflation at a six-month high is alarming. What’s the Central Bank doing about this? 🏦 #MonetaryPolicy”
@EfeInvestor: “Challenging times for investors in Nigeria. Need to rethink strategies amidst rising inflation. 📊 #InvestWisely”
@BolaEntrepreneur: “We need government intervention to stabilize prices and support businesses. Let’s hope for positive changes soon. 🙏 #HopeForNigeria”
@ZainabHealth: “Economic stress is affecting mental health. We need to address the human impact of these economic challenges. 🧠 #Wellbeing”
@KunleAnalyst: “The continuous fall in business activity is a wake-up call. Time for all stakeholders to come together. 🤝 #Collaboration