Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) shows that Nigerian economy maintains upward momentum.
March survey data signalled a solid end to the first quarter of 2017 as the Nigerian private sector continued to pick up growth momentum.
Furthermore, business conditions improved for the third straight month indicating an on-going recovery in the Nigerian economy.
The improvement was fuelled by marked and accelerated expansions in output and new orders. In addition, employment rose for the first time since October 2016 and firms scaled up buying levels.
On the price front, there were further increases in both input and output prices. The headline figure derived from the survey is the Purchasing Managers’ Index (PMI).
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
At 53.0 in March, the headline PMI rose from 52.2 in February, indicating a robust improvement in the health of the Nigerian private sector. The latest reading was the highest in 15 months and above its long-run average.
Commenting on March’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said: “The sustained rise of the Stanbic IBTC Bank Nigeria PMI through the first quarter of 2017, suggests that private sector business conditions continue to gradually improve and should result in a moderate improvement in the real GDP growth rate. Such an improvement will largely be reflective of some recovery in oil price/production as well as continuing strong performance in agriculture.”
He said, “The seasonally adjusted reading of the Stanbic Nigeria PMI for March moved higher to 53.0 from 52.2 in the prior month, as respondents suggested that new orders and output levels continued to rise, albeit from a low base. It remains clear that sustained growth of the Nigerian economy is hinged upon a rebalancing of the macro-fiscal environment, which itself is dependent upon structural and foreign exchange reform.”
According to Mejabi, “Elsewhere, the output price sub-index continued to moderate, reaching 52.6 in March from 54.1 in February, reinforcing our view that headline inflation should continue subsiding due to unwinding base effects from 2016. Interestingly, the input price sub-index rose to 53.5 from 52.2 in February as some panellists reported increased cost burdens. Potential upside risks to the inflation trajectory continue to come from the possible further weakening of the Naira as well as further increases in food inflation.”
The main findings of the March survey were: the main upward contributions to the index came from the expansions of new orders and output; and respondents reported that improving economic conditions led to higher volumes of new orders and subsequently activity.
Rates of expansion accelerated in both cases, with the rise in new business inflows being the most pronounced since December 2015 and output growth climbing to an 18-month high. The upturn in the latter was reported to be caused by increased investment and sustained demand growth. Concurrently, new export orders fell in March for the fifteenth month running. Despite accelerating since February, the downturn in new business from abroad was only slight.
Employment growth was indicated for the first time since October 2016. Anecdotal evidence suggested that an increase in workloads meant firms required more staff. That said, the expansion in payroll numbers was only fractional and below the series average.
Input prices rose again in March, with the scale of inflation accelerating since February and being solid overall. Upon analysis of the respective sub-indices, higher overall cost burdens stemmed from rising purchase prices as opposed to wages, which remained relatively unchanged. In response to greater cost burdens, firms raised their selling prices in March.
Iheanyi Nwachukwu
