Growth in the Nigerian private sector gained momentum in March with business conditions improving to the greatest extent in five months at the end of the first quarter. Output and new order growth strengthened for the second successive month which led to a solid rise in purchases.
Employment meanwhile rose marginally, and firms continued to reduce their backlogs at near-record rates. Looking forward, firms remain hopeful that their output levels will increase over the next 12 months, but there were signs of optimism moderating as sentiment fell to the lowest in three months.
Input price inflation remained robust with material shortages driving a sharp increase in purchase costs. In turn, firms raised their selling prices at a faster pace.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®), a property of Stanbic IBTC Bank PLC. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 52.9 in March, up marginally from 52.0 in February, the headline seasonally adjusted PMI signalled expansion, and one which extended the current sequence of growth to nine months.
Higher customer numbers led to a rise in new orders with the rate of growth the strongest since last October. This supported another expansion in output, and one which was solid overall. Sub-sector PMI readings indicated that manufacturing posted the fastest rise in output in March, followed by services and agriculture respectively.
Wholesale & retail meanwhile recorded a decline in activity. Rising output encouraged firms to increase their purchases and employment in March. Higher staffing allowed firms to complete outstanding work. The rate of reduction was the second-fastest in the series, surpassed only by that seen in February.
Meanwhile, the sustained growth in new orders supported a sharp accumulation in the stocks of purchases. Despite the higher demand for inputs, supplier delivery times continued to shorten, although the degree to which lead times improved was the weakest in ten months. Panelists mentioned that material shortages weighed slightly on vendor performance. As a result of a shortage in the supply of raw materials, purchase prices rose at the joint second-sharpest rate in the series. Higher staffing costs also contributed to a robust rise in overall expenses. The passing on of cost burdens to clients led output prices to increase a sharp and accelerated rate.
Finally, business expansion plans underpinned optimism at the end of the quarter, although the degree of positive sentiment dipped to a three-month low amid uncertainty. New orders rise at sharp and accelerated pace. Employment growth continues whilst backlogs fall markedly input price inflation remains historically elevated.
