Nigeria’s private sector experienced its first drop in employment in seven months, according to the latest Stanbic IBTC Bank Purchasing Managers’ Index (PMI®) report for November.
Employment in the private sector declined in November, ending a six-month streak of job creation.
The reduction in staffing levels was primarily observed in the services sector, though the fall was marginal.
This decline reflects the ongoing challenges faced by businesses in the face of rising costs and weakening demand. Companies also reduced their purchasing activity and inventory levels, further illustrating the cautious approach adopted amid inflationary pressures.
The report read: “Employment was also down, thereby ending a six-month sequence of job creation. The pace of reduction was only marginal, however, as the overall fall in staffing levels was limited to just services firms.”
New orders show a modest recovery
In November, new orders returned to growth, following a sharp decline in October. However, demand remained subdued as high prices continued to deter customers. Inflationary pressures, driven by a weakened currency and rising costs for fuel and raw materials, continued to weigh heavily on businesses.
As a result, output in the private sector fell for the fifth consecutive month, although the pace of decline slowed compared to previous months.
Inflationary pressures remain elevated
The report also highlighted persistent inflationary pressures, subdued business activity, and a reduction in output, despite a slight recovery in new orders.
The headline PMI, which tracks business conditions, stood at 49.6 in November, signaling a marginal contraction in the economy. Although this was an improvement from October’s reading of 46.9, it marked the fifth consecutive month of negative growth.
A reading below 50.0 indicates a deterioration in business conditions, while a figure above 50.0 signals expansion.
The report noted that input costs continued to rise sharply in November, driven by inflationary pressures linked to higher energy prices and raw material costs. Staff costs also increased, as businesses adjusted wages to help employees cope with rising living and transportation expenses.
To offset these increasing costs, companies raised their selling prices at a substantial rate, although the pace of inflation slowed slightly compared to October.
Mixed sectoral performance
Sector data showed mixed results across the Nigerian economy in November. While agriculture and manufacturing saw modest increases in output, the wholesale & retail and services sectors continued to contract. The subdued demand environment, coupled with elevated input prices, weighed on business performance across several industries.
Despite the challenges, supply chain conditions improved slightly in November. Firms reported shorter delivery times for inputs, driven by less congestion on the roads, prompt payments, and competition among suppliers. However, business confidence in the outlook for the coming months hit a record low, with firms citing uncertainty over continued inflationary pressures and weak demand.
- Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, commented on the broader economic outlook.
- He noted that while the PMI indicated a deterioration in business conditions, Nigeria’s non-oil GDP grew by 3.46% year-on-year in Q3 2024, up from 3.19% in Q2.
- Key growth drivers in the non-oil sector included ICT, finance, trade, and agriculture. However, Oni pointed out the disconnect between the PMI and GDP growth, as the PMI weakened despite strong performance in the non-oil economy.
- Looking ahead, Oni expects the Nigerian economy to maintain its growth momentum in Q4 2024, supported by increased economic activity during the festive season and a recovery in crude oil production. He has revised his full-year 2024 growth forecast to 3.2%, up from the previous estimate of 3.1%.
