Nigeria’s private sector demonstrated robust performance in August 2023, maintaining a trajectory of growth for the ninth consecutive month, according to the Stanbic IBTC Bank Purchasing Manager Index (PMI). This sustained expansion signals a healthy and resilient economic landscape, fueled by escalating output and new orders. Businesses are increasingly confident in the economic outlook, buoyed by easing input costs and a tempering of inflationary pressures. The PMI, a key indicator of economic health, registered at 54.2, exceeding the 50.0 threshold that demarcates expansion from contraction. This figure not only confirms continued growth but also represents the most significant strengthening of business conditions since April 2023.
The positive momentum in the private sector stems primarily from accelerated growth in both output and new orders. Output expansion reached a four-month high, while new orders surged to a 19-month peak, driven by robust customer demand and increased willingness to invest in new projects. Businesses reported a surge in client activity, demonstrating a renewed vigor in the Nigerian economy. This positive trend spanned across multiple sectors, with noticeable growth recorded in three out of the four sectors surveyed, the exception being manufacturing. This widespread expansion highlights the breadth of the economic recovery.
Employment figures also registered positive movement, with companies increasing their workforce to accommodate the influx of new orders. While the pace of job creation was moderate compared to July, it nonetheless contributes to an overall positive employment trend. Moreover, businesses successfully reduced their backlog of outstanding work for the first time in five months, indicating improved operational efficiency and capacity utilization. This achievement suggests greater productivity within the private sector, allowing companies to better manage their workload and potentially position themselves for future growth.
Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, provided further insights into the PMI report. He emphasized the consistent growth in business activity, highlighting the role of expanding output and new orders as primary drivers. Oni noted the significant increase in new orders, attributing it to heightened customer demand and companies’ proactive efforts to secure new projects. The establishment of new branches and the implementation of strategic marketing plans have further reinforced optimism regarding future output growth, suggesting a proactive and forward-looking approach by businesses.
Oni also addressed the easing of input costs, which reached their lowest level since March 2023, although they remained above the historical average. This moderation in input costs, coupled with a decline in output price increases for the fourth consecutive month – the slowest since April 2020 – indicates that inflationary pressures are gradually subsiding. This easing trend provides businesses with a more stable cost environment and could potentially encourage further investment and expansion. Oni suggests that the sustained moderation in both input and output prices may prompt the Central Bank of Nigeria’s Monetary Policy Committee to adopt a more accommodative monetary policy, potentially including interest rate cuts, as early as September.
Looking ahead, Oni projected a continued downward trajectory for inflation, estimating a rate of 21.45% to 21.63% year-on-year in August, potentially declining further to between 17.19% and 17.92% by November. This optimistic forecast, based on the observed trends in input and output prices, suggests that the Nigerian economy is on a path towards greater price stability. Oni anticipates that the Central Bank of Nigeria might implement cumulative rate cuts of up to 150 basis points in 2025 to further stimulate economic growth, demonstrating a proactive approach to maintain economic momentum. This anticipated policy shift reflects the positive developments observed in the private sector and points towards a favorable economic outlook for Nigeria in the coming years.
