By Nkiruka Nnorom
Nigeria’s private sector downturn continued in November, but a renewed rise in new orders provided a welcome boost to business conditions.
Though only slight, the expansion of new work was the first since January. Output and purchasing activity both fell regardless, with the decline in the former accelerating to a steep rate. Employment was meanwhile broadly stagnant. On the price front, cost pressures eased in the latest period, whereas charges rose at a faster pace.
The headline figure derived from the survey is the Purchasing Managers’ Index, PMI, Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Business conditions in Nigeria’s private sector worsened for the seventh straight month in November. This was signalled by the seasonally adjusted Stanbic IBTC Bank Nigeria PMI posting 47.7, up slightly from 47.5. The latest reading indicated that the pace of contraction had moderated further from August’s record (46.3), but was nevertheless sharper than the 2016 average (48.4).
Commenting on November’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said: “While the private sector is still characterised by contraction, the rate of contraction eased in November. This improvement was attributable to new orders.
New orders expanded modestly for the first time since January. Notably, the pace of contraction in new orders has been broadly decelerating since August. Actual output is still declining, with the pace of contraction accelerating in November. Indeed, every other facet of activity deteriorated in November. After improving in October to record some growth, employment slumped again.
The index measuring stocks fell back to 50 in November. Hence, while the overall PMI has actually improved marginally since the end of the third quarter, averaging 47.6 compared with 47.3 there is no assurance that the moderation in the pace of contraction in economic activity will be enduring. Of course, if stocks were to actually dwindle, then improving new orders could presage an eventual turnaround in production. But it is still too early to ascertain that such a turnaround is imminent.”
The main findings of the November survey were as follows: The main bright spot from November’s survey was renewed growth of new work. The rise ended a nine-month sequence of either stagnant or falling new business. That said, with new orders from abroad continuing to fall sharply, the increase in total new work depletion amid relatively weak sales and costly raw materials.
Nigerian private sector employment was broadly stagnant in November, following modest job creation in the previous month. Backlogs of work fell for the third consecutive month, although the rate of depletion eased to the weakest in this period.