Market News

By Tobi Awodipe

Selling prices by the private sector slowed to a seven-month low in February, the latest Stanbic IBTC Bank Nigeria’s Purchasing Managers’ Index (PMI) released yesterday, said. A drop in selling prices is an indication of an easing in the inflation rate.

The headline PMI, which tracks private sector performance, rose to 53.7 in February, up from 52 in January, marking the highest level since January 2024. A PMI reading above 50 indicates an expansion in business activity, while a reading below 50 signals a contraction.

According to the report, output increased for the third consecutive month, with the pace of expansion at its fastest in over a year. Businesses attributed the increase to stronger demand conditions just as new orders rose at the sharpest pace in over 12 months.

The report, which assessed business conditions in the private sector, indicated that the rates of expansion in output, new orders and purchasing activity quickened as demand picked up and inflationary pressures showed signs of moderating. Despite this, it noted further that companies were reluctant to hire with employment increasing very marginally.

The latest data suggested that a relatively stable exchange rate and lower fuel prices contributed to easing cost pressures, giving businesses the space to adjust prices downward.

The data showed that agriculture, manufacturing, services, wholesale and retail recorded growth in output. However, wholesale and retail sectors saw only marginal gains, indicating that some businesses in this segment were still experiencing slower recovery.

The report noted that higher raw material prices and a surge in staff costs, which rose at their sharpest rate since March 2024, continued to drive overall expenses.

Despite the pressures, the rate of increase in selling prices was the slowest in seven months, reflecting a cautious pricing approach by businesses. About 39 per cent of firms increased selling prices in February, while less than one per cent lowered their charges, indicating that businesses remain mindful of price-sensitive consumers.

Instead of hiring more workers, businesses boosted purchasing activity, leading to the fastest increase in input buying since May 2023. Stocks of raw materials also rose at a faster pace as firms sought to build inventories in anticipation of future demand growth.

Supplier delivery times improved, with goods arriving faster than in the previous months, the report said, attributing the improvement to prompt payments, which helped to ensure efficient supply chain management despite persistent cost pressures.

Despite the optimism, business sentiment still dipped in February, with some firms expressing concerns about future cost outlook.

Commenting, the Head of Equity Research, West Africa at Stanbic IBTC Bank, Muyiwa Oni, noted that exchange rate stability and lower fuel costs played a key role in easing an inflationary trend.

“Activity in Nigeria’s private sector improved for the third consecutive month with the latest PMI reading of 53.7 points in February at its highest level since January 2024 (54.5 points).

“A relatively stable exchange rate and moderation in fuel prices are supporting the ease in inflationary pressures, which in turn helped strengthen consumer demand in the month. Thus, new orders increased for the fourth consecutive month, with survey participants noting a greater desire on the part of customers to commit to new projects,” he said.