Inflationary pressures continue to hit Nigerian businesses as up to 49% of business in the country reported increasing prices of products and services in the past month September.
This is according to the Stanbic IBTC Purchasing Managers’ Index (PMI) for the month of September where business conditions in the country continue to remain worse at 49.8- a below 50 reading for the third consecutive month.
According to the report, the cost of inputs for businesses rose at the sharpest rate in six months as output decreased for the month.
The report noted that the weakness in the naira for the month coupled with increase in petrol prices exacerbated transportation and logistics cost which was passed on to consumers.
It stated, “Purchase prices rose rapidly amid currency weakness and higher costs for fuel, logistics, materials and transportation. Some firms made efforts to help their workers with higher living costs, but the rate of wage inflation eased to an 18-month low. Higher costs were then passed through to customers, with close to 49% of respondents raising selling prices in September.”
Decline in business confidence, business confidence
It was reported that although sharp price increases limited customer demand, new orders rose for the second consecutive month in September, slightly exceeding August’s increase. In the month under review, business activity continued to decline marginally as the improvement in new orders was insufficient to boost output, marking the third consecutive monthly decrease in activity.
While output increased in agriculture and manufacturing, it declined in wholesale & retail and services. Employment grew for the fifth month in a row, but only marginally, as some firms limited hiring to reduce costs.
Business confidence fell in September, marking the second-lowest level on record, just above the nadir posted in July. The respondents who were optimistic about the year-ahead outlook attributed their optimism to hopes for improved business conditions and plans for business expansion.
Insights
Despite inflation slowing in the past two months of July and August 2024 to 32.15 according to the National Bureau of Statistics (NBS), analyst project September’s inflation to rise due to recent events in the energy and foreign exchange sectors.
The projected increase in inflation stems from renewed weakness in the Naira and the increase in petrol prices by the NNPCL in September.
The Naira closed September at N1,541/$ on the official NAFEM window but fell to a seven-month low on the parallel market at N1,700/$.
Furthermore, the NNPCL in September increased the pump price of petrol from N617 per litre to almost N1000/litre and with the roll out of petrol from the Dangote refinery, petrol prices in some states sold for over N1,000 per litre in NNPC retail stations.
