Weak confidence in economy ends Q1 as businesses battle inflation, FX crisis

•Employment subdued for second consecutive month

Last month’s purchasing manager index (PMI) showed no changes in business confidence, stagnating at 51 points at the end of the end of last month, the joint-lowest in the last four months.

The report commissioned by Stanbic IBTC Plc showed that the impact of naira weakness on the Nigerian private sector remained strong.

The report revealed that confidence in the year ahead for business activity strengthened “very slightly” from the previous month’s record low, but remained relatively weak at the end of the first quarter of the year.

The report also stated that purchase costs rose at the sharpest rate on record, meaning companies increased their selling prices at an unprecedented pace.

The rate of expansion in business activity ticked higher, but steep price rises acted to limit demand and the pace of new order growth eased to a four-month low.

Meanwhile, employment decreased for the second month running.

Readings above 50 points signal an improvement in business conditions on the previous month, while readings below 50 points show deterioration.

The report showed that as price pressures remained elevated in March with the rate of purchase price inflation hitting a fresh record high for the second consecutive month, largely due to the weak currency.

Higher transportation costs were also recorded, just as some employees’ salaries also increased in response to cost-of-living pressure, resulting in the sharpest rise in staff costs since last November.

According to the report, the rate of output price inflation was also the steepest since the series began in January 2014, as close to 69 per cent of respondents increased their charges. With prices rising sharply, firms faced challenges securing new orders.

The report added that though new businesses increased for the fourth month running as some companies noted greater client interest, the rate of expansion was poor “in the current sequence of growth”.

“The rate of expansion in business activity quickened slightly from February but remained relatively modest. Increases in activity were seen in the agriculture, manufacturing, wholesale and retail and services categories,” it noted.

While output and new orders continued to rise, employee resignations caused staffing levels to decrease marginally for the second month running, it noted. Purchasing activity returned to growth, the report said, following a reduction in the previous survey period.

Where input buying increased, it was linked to efforts to meet new order requirements promptly. This was also a factor behind the sustained growth of inventories, it reported.

Also, backlogs of work ticked higher amid the high cost of materials and delays in payments by customers. Suppliers’ delivery times, meanwhile, continued to shorten, due to muted demand for inputs and prompt payments.

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