LAGOS – Nigeria’s private sector logged its strongest expansion in nine months as the S&P Global Purchasing Managers’ Index jumped 3.24% to 54.1% in May from 52.4 in April.
The headline reading signaled a solid monthly improvement in business conditions across the country. The health of the private sector has now strengthened for four consecutive months.
Accelerated expansions in both output and new orders drove the growth. Anecdotal evidence from surveyed firms pointed to improving customer demand and the successful launch of new products.
Output growth was recorded across manufacturing, agriculture, services, and wholesale and retail sectors. Improving demand led companies to aggressively expand their purchasing activity and inventories during the month.
Efforts to secure inputs were helped by an improvement in vendor performance. Prompt payments and better road conditions helped to speed up supplier delivery times.
Despite rapid growth, employment rose only slightly midway through the second quarter. Sustained job creation has now been recorded on a monthly basis for an entire year.
Meanwhile, backlogs of work increased for the fourth successive month. Firms blamed customer payment delays, raw material shortages, and recurrent power failures for the persistent operational delays.
Increasing fuel costs following geopolitical tensions in the Middle East drove up purchase prices. Purchase costs rose rapidly again, despite the overall rate of cost inflation easing.
Output prices continued to rise sharply as firms passed expenses to consumers. Manufacturing and agriculture experienced the steepest increase in output prices as firms defended margins.
This private sector rebound follows a weaker-than-expected first-quarter real GDP growth rate of 3.89%, which was dragged down by a slowing non-oil sector.
The policy environment remains highly restrictive for businesses. The Central Bank of Nigeria recently held its benchmark interest rate at 26.5% to curb stubborn inflationary pressures.
National Bureau of Statistics data showed headline inflation quickened to 15.69 percent in April. Elevated transport and food prices continue to pinch corporate margins and consumer wallet share.
