The Nigerian private sector registered a slight loss of growth momentum in January. Output and new business continued to rise markedly, but at softer rates than at the end of 2022.
On a more positive note, firms raised employment at the fastest pace since June 2018 as part of efforts to complete work on time. On the price front, rates of inflation of input costs and output prices softened in January, but remained elevated. Analysis by Stanbic IBTC Bank showed that the headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMI®). Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration. The headline PMI dipped to 53.5 in January from 54.6 in December. Although still signaling a solid monthly strengthening of the private sector and the thirty-first in consecutive months, the rate of improvement was the softest since August 2022.
Business activity increased at a much slower pace at the start of the year, despite the rate of growth remaining marked. The latest rise was the weakest in five months. Demand continued to improve, but some firms reported a moderation in customer numbers. Activity increased across each of the four broad sectors covered by the survey.
The rate of expansion in new business also softened in January, but remained sharp nonetheless, again reflecting higher demand from customers. A desire to try and complete projects on time led companies to ramp up their hiring activities at the start of the year. Employment increased at a solid pace that was the fastest since June 2018. Despite expanded staffing levels, backlogs of work increased for the first time in three months. Firms reported having been hindered by issues with machinery and power supply.
Higher workloads and positive expectations regarding the outlook for activity led companies to expand their purchasing activity sharply again, with the rate of growth unchanged from December. In turn, stocks of purchases also rose further. Efforts to secure inputs were helped by improving supplier performance. Competition among vendors, quiet road conditions and prompt payments all contributed to a shortening of delivery times, and one that was the most pronounced in four months.
The rate of input cost inflation softened for the second month running in January and was at a one-year low. The slowdown in overall cost inflation largely reflected a softer rise in purchase prices, albeit one that was still substantial. Purchase costs increased on the back of rising fuel and raw material costs, exacerbated by currency weakness. Meanwhile, staff costs rose at the fastest pace in 11 months as companies increased pay in line with higher living costs. Output price inflation also remained elevated as higher cost burdens were passed on to customers.