Job creation slows despite improved customers’ demand – Report

The Purchasing Managers Index (PMI) released by Stanbic IBTC Nigeria showed growth in the Nigerian private sector continued to gain momentum in August as customer demand improved and inflationary pressures softened. However, output increased across three of the four broad sectors covered by the survey, the exception being manufacturing. The report compiled by S&P Global […]

The Purchasing Managers Index (PMI) released by Stanbic IBTC Nigeria showed growth in the Nigerian private sector continued to gain momentum in August as customer demand improved and inflationary pressures softened.

However, output increased across three of the four broad sectors covered by the survey, the exception being manufacturing.

The report compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies indicated sharper increases in output and new orders were recorded, although rates of expansion in purchasing activity and employment eased.

Daily Trust reports that PMI gives an overview of the market conditions and explains whether the market is expanding or contracting.

PMI is measured between 50-100 with an index above 50 per cent showing expansions and below 50 per cent showing contraction in business activities.

According to the latest report, business activity has remained above 50 per cent since the beginning of the year.

The report added that business confidence softened but firms remained optimistic that output will increase over the coming year.

 

New orders hit 19-month high

The rise in the headline index primarily reflected sharper expansions in output and new orders, with rates of growth hitting four- and 19-month highs respectively.

Panellists reported stronger customer demand and a greater willingness among clients to commit to new projects.

While firms continued to expand staffing levels in response to higher new orders, the rate of job creation was only slight and softer than that seen in July. Companies were nonetheless able to deplete outstanding business for the first time in five months.

A slower increase in purchasing activity was also registered in August. Nonetheless, input buying rose markedly in response to improving customer demand, with positive expectations for the future also encouraging firms to accumulate inventories.

Expectations for output growth over the coming year reflected predictions of higher new orders, the opening of new branches and advertising activity. Sentiment eased for the second month running, however, and was relatively muted.

Inflationary pressures waned midway through the third quarter. The pace of increase in purchase prices slowed for the fourth consecutive month and was the weakest since March 2020.

Meanwhile, the pace of staff cost inflation eased to a three- month low. Where wages increased, panellists linked this to incentives for faster project delivery and cost-of-living payments.

According to the report, firms responded to higher new orders by expanding their staffing levels during August, the third month running in which job creation has been registered.

“That said, the latest rise was only slight and softer than that seen in July. Modest improvements in workforce numbers were recorded across all four monitored sectors.

“Nigerian companies increased their stocks of purchases for the ninth consecutive month in August. The rise was sharp, albeit slightly weaker than in July.”

Panellists reported that inventories had been accumulated in response to higher new orders and positive expectations regarding customer demand in the months ahead.”

Speaking to the report, Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “Business activity increased further in August and has remained above 50 points for the ninth consecutive month. The increase in business activity was driven by sharper increases in output and new orders.

“Notably, output (56.8 points vs July: 56.1 points) increased in line with customers’ willingness to commit to new projects, while the growth in new orders (58.3 points vs July: 57.3 points) quickened to a 19-month high amid reports of increasing customer demand. Given these higher new orders, firms expanded their staffing levels for the third consecutive month. The opening of new branches and marketing plans are also supporting firms’ optimism that output will increase over the coming year.”

‘MPC rates’ moderation expected’ 

According to him, elsewhere, input cost eased to its lowest level since March 2023 even as the latest increase is still above the series average.

He added, “In line with this, the rate of increase in output prices moderated for the fourth consecutive month in August and the slowest since April 2020. The continued moderation of input and output prices still suggests that inflation is likely to remain soft in the near term, and may incentivize the MPC of the CBN to switch to an accommodative monetary policy by September from the current neutral stance.”

“Indeed, we estimate headline inflation to moderate further in August to 21.45% y/y – 21.63% y/y, and possibly settle at 17.19% y/y – 17.92% y/y by November. Accordingly, we still expect up to 150 bps cumulative rate cut in 2025.

“Nigeria’s rebased economy shows real GDP increasing by 3.13% y/y in Q1:25 – slower than the 3.76% y/y revised growth in Q4:24 – and also the lowest since Q1:24 when the economy grew by 2.27% y/y. At 78.6%, relative to 70.0% in Q4:24, services contributed the most to GDP growth in Q1:25, but agriculture shrank to 0.5% in Q1:25, from 19.7% in Q4:24.

“Industries in Q1:25 contributed an impressive 20.9%, from 10.4% in Q4:24, in line with our long-held view that industries should start contributing more to real GDP growth from 2025 amid the structural shift introduced into the sector by the operations of Dangote Refinery. Overall, the Nigerian economy is still on track to grow by 3.5% y/y in 2025 from 3.4% y/y growth seen in 2024 supported by softer inflation, improvement in FX liquidity conditions, and structural reforms.”

 

…Food prices remain high despite inflation easing

Meanwhile, a market survey at some Lagos markets has shown that staple food and frozen product prices remain elevated despite a marginal drop in Nigeria’s inflation rate.

Traders confirmed that the cost of Ponmo now ranges between N400, N600 and N1,000, depending on size and quality. Yam sells for N4,500 per tuber, while a carton of Indomie noodles goes for between N9,500 and N10,000. A carton of Mimi noodles sells for N7,700, and Golden Penny spaghetti remains in high demand though prices continue to vary by pack size.

For grains, a 50kg bag of long-grain rice now sells for N75,000, while short-grain rice goes for N64,000. A derica of short-grain rice costs N1,100. Beans sell for N1,100 per derica (oloyin), N900 (drum variety), and N1,000 (white beans). A derica of garri is N400, while a paint rubber costs N1,800. Corn flour sells for N3,500 per paint rubber and millet for N2,500.

For household staples, semolina sells at N7,300 for a 5kg bag and N14,600 for 10kg. A pack of Gino products is priced at N7,600, while a 25-litre keg of Kings vegetable oil costs N66,000. Red oil (5 litres) is sold at N10,000.

Perishable food prices also remain high, with a basket of tomatoes costing between N40,000 and N50,000, while a small sack of pepper is priced at N30,000. A sack of onions sells for N100,000.

Mrs. Bose Alao, a pepper seller at Agege Market, said the cost of the commodity has been unpredictable. “The price is never consistent; it changes almost every week, sometimes going up or dropping slightly depending on supply,” she explained.

Frozen and fresh protein prices have seen little relief. A kilo of Titus fish costs N8,000, chicken sells for N4,500 per kilo, while Orobo chicken is N5,200. Beef is sold between N6,000 and N6,500 per kilo. A crate of eggs costs between N5,500 and N6,000, depending on size.

Traders say the high cost of transportation, multiple levies, and supply shortages from farms continue to push up food prices across Lagos markets.

An economist, Dr. Lawal Wasiu Omotayo expressed concern that Nigeria’s macroeconomic indicators such as GDP, inflation, and exchange rate, which should ordinarily strengthen the country’s outlook, are struggling for survival, noting that the nation does not have a functional price control system.

He said, “An import-driven economy thrives on finished products, but production reduces unemployment, broadens the tax net, and reduces crime. Manufacturers must be given a conducive environment, free from excessive taxation that discourages infant industries. Only then will we see reduced interest rates.”