Business Experience Positive Growth, Albeit at a Weaker Pace – Report

Businesses in Nigeria experienced positive growth in the month of September despite the negative impacts of COVID-19.

In a recent report titled “Business conditions continue to improve, albeit at a weaker pace” and published on Tuesday by Stanbic IBTC Bank, businesses in the private sector remained in growth territory in September despite the weaker pace of growth.

The report read in part, “The Nigerian private sector remained in growth territory in September, although there were some signs of moderation as rates of expansion in output and new orders softened.

“Companies continued to expand purchasing activity and employment in line with higher new orders. Suppliers’ delivery times improved further amid a lack of road congestion.

“Meanwhile, increased workforce numbers and sufficient capacity to fulfill new orders led to a series – record decline in the level of incomplete work.”

It, however, stated that September’s business sentiment was the weakest since the commencement of the survey in January 2014 as several businesses expressed difficulty in planning for the year ahead.

On price, the firms surveyed said input price inflation increased raw material costs due to the unfavourable exchange rates.

The report stated that the Manufacturing Purchasing Managers’ Index stood at 52.5 in September, above the 50 mark that separates expansion from the contract. However, the reported that business activities declined in September when compared with August when PMI was 54.6.

At 52.5 in September, the headline seasonally adjusted PMI signalled expansion and one which extended the current sequence of strengthening business conditions to three months. That said, down from 54.6 in August, the reading pointed to a more moderate improvement.

Output and new orders rose sharply during September.

In both cases, firms attributed growth to improvements in customer demand following the easing of restrictions related to the coronavirus disease 2019 (COVID-19).

Higher workloads prompted firms to increase staffing levels which led to the fastest pace of job creation since February. The rise in workforce numbers paired with sufficient capacity led to a series-record depletion in the amount of outstanding business.

Higher purchase costs was the main factor behind strong overall inflationary pressures. Purchase price inflation was substantial following reports of unfavourable exchange rate movements.

Firms responded to improving customer demand by raising purchasing activity at a sharp pace. Respondents also reported solid growth in stocks of purchases which was linked to planned increases in output levels. Prompt orders and quiet road conditions meant that input delivery times shortened to the greatest extent in almost two-and- a-half years.

Looking ahead, business confidence remained positive overall as firms continue to foresee a rise in output over the year ahead. That said, sentiment dropped to the lowest in the series so far amid reports that some firms were not planning to expand output at present.