Inflation: Nigerian businesses experienced worsening conditions in October –Report

• Nigerian businesses saw worsening conditions and slower activity in October
• Stanbic IBTC’s PMI noted a change in the staffing and hiring dynamics of businesses
• The decline in business activities is traceable to heightened inflationary pressures

The Stanbic IBTC Purchasing Managers’ Index (PMI) for October has revealed that Nigerian businesses experienced worsening conditions in the month due to inflationary pressures.

The report noted that cost pressures were triggered, resulting in the sharpest decline in business activities in October for the first time in 19 months to 46.9 from 49.8 in September.

It added that the increase in the prices of inputs, caused by a higher cost of transportation and a weakened currency, led to a corresponding increase in selling prices, significantly impacting business activities as demand declined for the first time in three months.

“The headline PMI dropped to 46.9 in October from 49.8 in September and signalled a marked deterioration in business conditions that was the most pronounced since March 2023.

“Central to the worsening business environment in October was an intensification of already strong inflationary pressures. Overall input prices surged higher, with the latest rise the third-fastest in the survey’s history,” the report noted. 

Businesses hiring and staffing dynamics

The report also noted that with workers also facing higher living costs, businesses increased workers’ pay to the largest increase seen in seven months.

On staffing, the report added that companies continued to increase staffing levels, which saw the sixth consecutive month of employment growth, although at a modest pace.

The report also stated that some firms hired staff on a short-term basis to ensure timely completion of work, while others reduced their workforce due to cost pressures.

Heightened inflationary pressures impacting businesses

Nigeria’s inflation rate has continued to soar amid the depreciation of the naira and higher transportation costs due to an increase in the price of fuel, a fallout of the infamous fuel subsidy removal.

With many months of increase, the inflation rate reached a new 28-year all-time high of 34.19 per cent in June 2023. It tapered in July after 19 months, declining to 33.40 per cent. The rate further declined for the second consecutive month in August to 32.15 per cent before increasing to 32.70 per cent in September 2024.

Inflationary pressures have contributed to shrinking Nigerians' purchasing power and escalating an already heightened cost of living crisis.

Inflation: Nigerians to spend 54.9% income on food in next 6 months, projects CBN

Meanwhile, TheRadar reported that according to a recent survey by the Central Bank of Nigeria (CBN), the escalating inflation rate in Nigeria is expected to lead households to dedicate the largest portion of their earnings to food expenses over the next six months.

The survey, conducted from July 22 to 26, 2024, reveals that the inflation rate has surged to 33.40 per cent, with food inflation exceeding 40 per cent.