Price Pressures Push Purchasing Power of Nigerians Downward in February

Price pressures intensified in the Nigerian private sector during February and were unprecedented in over a decade of data collection, even as both input costs and output prices increased at the sharpest rates on record, with rising prices impacting demand.

This is according to the Purchasing Managers’ Index (PMI) report released by Stanbic IBTC as the business environment in Nigeria dropped to 51.0 points in February, according to the Purchasing Managers’ Index (PMI) report released by Stanbic IBTC.

The report said: “As a result, rates of expansion in output and new orders slowed sharply over the month, while employment decreased for the first time in ten months. Meanwhile, business confidence dropped to the lowest on record.”

The headline PMI dropped markedly in February to 51.0 from 54.5 in January, remaining above the 50.0 no-change mark for the third month running but only just. The improvement in business conditions was the weakest since the recovery in the private sector began last December.

The report noted that “input costs surged higher in February, often as a result of exchange rate weakness, which drove up material costs, but also higher fuel prices. The latest rise in overall input costs was by far the sharpest since the survey began in January 2014, with around 78 per cent of respondents signalling an increase over the month.

“Similarly, output price inflation also hit a fresh record high in February as firms passed through rising input costs to their customers.”

Head of Equity Research, West Africa at Stanbic IBTC Bank, Muyiwa Oni stated that “the Nigerian economy grew by 3.46 per cent year-on-year in Q4, 2023, an improvement when compared with 2.54 per cent Y-o-Y growth witnessed in Q3, 2023. The improvement in the Q4, 2023 print was in line with improvement across the oil and non-oil sectors.”

He explained, “Stanbic IBTC Bank headline PMI slowed to its weakest level since December 2023, moderating remarkably to 51.0 in Feb from 54.5 in January Employment level dropped below the 50.0 no-change mark for the first time in 10 months while the output and new order’s expansion both weakened significantly in the month.

“These weaknesses were in line with the sharp local currency depreciation, increase in fuel prices, and rapidly rising food costs in February, thereby driving overall cost pressures in the month. These lingering pressures may push domestic demand low, limiting growth potentials in Q1, 2024.”

According to him, furthermore, price pressures remain biased to the upside over H1, 2024 and tight monetary conditions could constrain business investments.

“Notably, interest-rate sensitive sectors like manufacturing, construction, real estate, and trade are likely to see moderation in growth levels relative to the prior year. Accordingly, the non-oil sector’s growth is on track to moderate in 2024 compared to 2023. We project the Nigerian economy will grow by 2.9 per cent in 2024,” he stressed.