The latest report from Stanbic IBTC Bank Nigeria reveals that most businesses continue to report a drop in demand due to rising product costs. Nigerian industries have recorded the sharpest increase in input costs and output prices in six months. High pump prices, transportation, and materials for manufacturers have continued to affect businesses in recent weeks.

Nigerian businesses struggle with inflation

Rising inflationary pressures in Nigeria hit businesses hard at the end of the third quarter, with sales prices increasing dramatically the highest surge in six months. In September, the country’s private sector reported weak employment opportunities, the lowest in three months.

According to the PMI index from Stanbic IBTC Bank Nigeria, most businesses continued to report declining demand, largely due to increased product costs amidst falling incomes. The findings show that business confidence fell in September, reaching the second-lowest level ever recorded, just above July.

« Nigeria’s PMI remained below the 50-point threshold for the third consecutive month, standing at 49.8 points in September, compared to 49.9 points in August, noted Muyiwa Oni, head of West African equity research at Stanbic IBTC Bank. He added This indicates a further partial deterioration in business conditions, the third in as many months, largely due to difficult demand conditions in an inflationary environment ».

Inflationary pressures weigh on Nigeria’s economy

Nigeria’s economy has been increasingly impacted by inflationary pressures at the end of the third quarter, with businesses reporting significant rises in input costs and output prices. According to the survey conducted between September 12 and 26, markets saw the highest increase in input costs and output prices in six months. While production increased in agriculture and manufacturing, it declined in wholesale and retail trade and services. At the same time, businesses remained reluctant to hold inventories, cutting down on purchases for the second consecutive month.

Additionally, monetary challenges affecting the naira have negatively impacted purchasing prices in the markets. Notably, pump prices, transportation costs, and materials for manufacturers have continued to hurt businesses, according to the report. However, thanks to higher crude oil production compared to the same period last year, the oil sector is expected to offset the poor performance of the non-oil sector, forecasts Stanbic IBTC Bank Nigeria.

Cautious approach

« Business activity has been disappointing, suggesting that the non-oil sector could grow slowly amid a triple shock of high inflation, high interest rates, and currency volatility », added Muyiwa Oni.

However, new orders increased for the second consecutive month, albeit at a higher rate than in August. Businesses also maintained a cautious approach to inventory levels, reducing input stocks for the second consecutive month the most significant drop since May 2020. Companies were also eager to clear work backlogs wherever possible, given the cost of storing goods.

The reduction in inventories occurred despite a new rise in purchases, the first in three months. At the same time, supplier delivery times continued to shorten at a steady pace.