Nigeria’s Economic Struggles Persist as Inflation and Rising Costs Lead to Job Cuts

Nigeria’s economic challenges persist as businesses struggle with inflation and rising operational costs, forcing many to downsize their workforce....CONTINUE READING>>>

The latest Purchasing Managers Index (PMI) report from Stanbic IBTC highlights a continued decline in private sector activity, with a headline index of 49.6 for November—slightly improved from October’s 46.9, but still below the 50.0 mark that indicates growth. This prolonged downturn is attributed to weakening consumer demand amidst escalating prices.

Across various sectors, especially wholesale, retail, and services, companies have been scaling back on purchasing and reducing staff numbers. The report notes a marginal improvement in business conditions, partly due to a slight recovery in new orders after a significant drop in October. However, high prices remain a major deterrent for customers, impacting overall demand.

The inflationary pressures, along with subdued demand, have continued to negatively affect business activity for the fifth consecutive month. However, the decline was less severe than in previous months, with some improvements in agriculture and manufacturing output, contrasted with decreases in wholesale, retail, and service sectors.

Rising purchase costs, driven by currency weakness and higher fuel and raw material prices, have further strained businesses. Staff costs also increased as companies attempted to assist workers with rising living and transportation expenses.

Muyiwa Oni, Stanbic IBTC’s Head of Equity Research, noted that while the private sector’s performance worsened in November, the decline was less sharp compared to October. The return to growth in new orders, although modest, was a positive sign. Looking ahead, Oni expects the economy to maintain its momentum from Q3 2024 into Q4, supported by increased economic activity during the festive season and an uptick in crude oil production.

Despite some signs of demand improvement, the persistent high prices continue to hinder consumer spending. Based on the November PMI results, the economy is projected to grow by 3.24% year-on-year in Q4 2024, leading to an upward revision of the full-year growth estimate to 3.2%, from the previous 3.1%.