Purchasing Managers’ Index (PMI) Goes Up Moderately in May 2024

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June 5, 2024/CSL Research

In May 2024, the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) saw a moderate increase, rising to 52.1 points from 51.1 points in April. This indicates a modest expansion in business conditions within the private sector. The May reading is the second highest of the year, with January’s PMI being the highest at 54.5 points. A PMI reading above 50 signifies expansion, while a reading below 50 denotes contraction.

The current PMI suggests that Nigeria’s private sector activity continued to improve in May, although the rate of expansion remained slower than the series average due to inflationary pressure on demand.

In May 2024, Purchase costs and selling prices increased at their slowest rates in a year, contributing to a sharper rise in both output and new orders compared to the previous month.

Though employment levels did not grow, adjustments for cost-of-living expenses resulted in increased employee expenses. Purchasing activity also grew, possibly due to improved customer demand as the pace of growth in inflation begins to slow down. New orders also saw an uptick in May. Additionally, the report noted that suppliers’ delivery times have been shortening since March 2023.

According to the Gross Domestic Product (GDP) report published by the National Bureau of Statistics (NBS), Nigeria’s GDP grew by 2.98% y/y in real terms in Q1 2024. This growth rate is higher than the 2.31% recorded in the first quarter of 2023 due to the low base in that quarter but lower than the 3.46% growth rate in the fourth quarter of 2023.

The reduced growth rate may be attributed to current challenging economic conditions. The persistent devaluation of the national currency, high inflation and high interest rates will continue to exert downward pressure on the Purchasing Managers’ Index (PMI).

Heightened economic uncertainty surrounding Nigeria may dampen investment decisions and erode corporate confidence, prompting companies to adopt a more cautious approach towards expansion initiatives. Doubts persist regarding the effectiveness and sustainability of the Central Bank of Nigeria’s efforts to bolster stability and liquidity in the foreign exchange market. Consequently, the nation’s PMI is likely to expand at rates below the series average.

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