Report: Productivity Declined Marginally in June as Agriculture, Manufacturing Outpaced Services

Dike Onwuamaeze

Productivity of the Nigerian private sector declined from 52.1 in May to 50.1 in June even though the real sector as represented by agriculture and manufacturing sectors posted faster growth of activity than services and wholesale and retail sectors.

This was revealed by the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) data, which signaled a broad stagnation of the private sector as subdued demand and intense price pressures led to slowdowns in growth of output and new orders in the month of June 2024.

The PMI report also stated that there were signs that inflationary pressures were picking up as purchase prices, staff costs and selling charges increased more quickly in June than in May.

The PMI also reported that although new orders continued to rise in June, the rate of expansion was only marginal and the weakest in the current seven-month period of growth.

The report said that sharp price rises meant that customers faced challenges being able to commit to new projects.

It said: “Companies increased their selling prices rapidly again in June, with the pace of inflation quickening slightly from that seen in May.

“The sharper rise in output prices was in tandem with a faster increase in input costs. Purchase price inflation was recorded amid currency weakness and higher raw material costs, particularly those related to animal feed.

“Meanwhile, efforts to help workers with increased living and transportation costs led to a further solid rise in wages.”

The PMI also showed that backlogs of work ticked lower in June, thereby ending a three-month sequence of accumulation.

“The fall in outstanding orders reflected muted demand, with some firms indicating that all incomplete business had been cleared. On the other hand, some respondents saw backlogs of work increase amid difficulties purchasing the materials needed to complete projects,” it said.

It further reported that the rate of inflation in overall input prices remained elevated in June, ticking higher for the second month running to the strongest since March.

“Close to 60 per cent of respondents posted a rise in input costs during the month. Agriculture registered the fastest increase in overall input prices, closely followed by manufacturing.

“Nigerian companies again faced a rapid increase in their purchase costs during June, with the pace of inflation quickening from that seen in May,” it said.

It attributed the input costs’ upward movement to currency weakness that led to higher purchase prices and added that the higher costs for raw materials were also widely mentioned, in particular animal feed.

The report said: “In line with the trend in input costs, companies increased their own selling prices sharply again in June.

“The pace of inflation quickened slightly from that seen in May. Around 41 per cent of respondents posted a rise in charges, with just 2.0 per cent lowering selling prices.

“As was the case with input prices, the sharpest pace of inflation was in agriculture.”

According to the Head of Equity Research West Africa at Stanbic IBTC Bank, Mr. Muyiwa Oni, the Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in growth of output and new orders.  

Oni said: “Nigeria’s private sector activity as measured by the headline PMI ended Q2:24 on a weak note as the domestic economy continues to be affected by elevated price pressures, high interest rates and lingering currency weakness.

“The PMI reading in the quarter is consistent with a likely slowdown in non-oil sector’s growth to 2.6 per cent y/y in Q2:24 from 2.8 per cent y/y in Q1:24.

“Nonetheless, headline inflation is likely to peak in June, with moderation expected in H2:24 as the year-on-year effects of PMS subsidy removal (which induced higher fuel prices) and significant currency depreciation (which accompanied the FX unification) fade.

“This, in addition to the commencement of the primary harvest season in September, is likely to provide some respite for consumers in H2:24.”