Nigeria’s private sector ended 2015 in good position with business conditions improving to the highest level since July. According to statistics from Stanbic IBTC Bank Purchasing Managers Index (PMI) for December 2015, a key factor behind growth of the sector as a whole was higher new orders – the latest rise was the fastest in six months.
Output rose more quickly as a result, while employment increased at a solid pace. On the price front, cost pressures intensified in December. Higher purchase prices had little impact on charges, as they fell for the second time in three months.
The seasonally adjusted Stanbic PMI posted 54.5 in December, thereby signalling a solid improvement in operating conditions at companies in the country up from 53.9 in November. The latest reading was the highest in five months.
Commenting on December’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said:
“The December Nigeria PMI reading (at 54.4) suggests that the recent recovery in private sector activity was sustained through the end of the year. The brisk pace of increased output and new orders appears to have carried on from November, after some clarity around the new government’s economic team as well as its policy leanings.
Certainly, as the 2016 budget proposal suggests government is looking to stimulate growth by deficit financing as well as reforming the revenue collection processes. This should facilitate some modest pickup in economic activity. However, budget execution risks, the continued weakness in commodity prices as well as the collapse in import related trade activity due to a scarcity of dollars pose risks to a quicker recovery in economic activity.”
The main findings of the December survey were listed as follows: a sharper expansion in new work was a factor underpinning private sector growth at the end of 2015. Growth of new business picked up to a six-month high, and was broadly similar to the series average. Anecdotal evidence pointed to a general improvement in client demand, while latest data highlighted a renewed increase in exports. Foreign orders rose for the first time since February, albeit only marginally.
Reflective of higher new business, Nigerian private sector firms raised their output in December. The rate of growth was solid and in line with the 2015 average, although it remained slower than the trend seen over 2014 as a whole.
The rise in new work was also sufficient to encourage more companies to boost their purchasing activity in December. The latest expansion was the most marked in 13 months, and it led to an acceleration in the rate of pre-production inventory building.
Job creation was a further by-product of robust new order growth at the end of the year. The pace of hiring was relatively strong, albeit slightly weaker than in the prior month. Workforce expansions were reportedly behind backlog depletion at some panellists in December. With capacity pressures evident at other firms, work-in-hand was broadly unchanged overall. Meanwhile, total input prices rose sharply in December.