Report: Nigeria Private Sector Recorded Improved Productivity in December

Dike Onwuamaeze

The Nigerian private sector recorded a solid improvement in its productivity during the final month of 2024.

According to the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PM1) for December 2024, the headline index went up to 52.7 in December from 49.6 it recorded in November 2024.

The PMI report said: “Output returned to growth in the Nigerian private sector in the final month of 2024, thereby ending a five-month sequence of decline.  Moreover, the pace of expansion was marked and the fastest since last January as growth was recorded across each of the four broad sectors covered by the survey.”

It added that, “Overall business conditions improved as new orders increased for the second month running and renewed expansions were seen in output, employment and purchasing. That said, rates of inflation remained elevated. At 52.7, the index was up from 49.6 in November and signaled a solid improvement in the health of the private sector that was the most pronounced since January 2024.”

According to the report, sustained growth of new orders led to a renewed expansion of business activity in December, thereby ending a five-month sequence of contraction as all four broad sectors signaled rising output at the end of 2024.

It said: “December data pointed to a solid increase in new orders at companies in Nigeria, with the latest rise the sharpest since May. New business has now increased in four of the past five months. According to respondents, the rise in new orders reflected improvements in customer demand.”

The PMI also stated that the December data pointed to a renewed expansion in purchasing activity at Nigerian companies, following two consecutive months in which input buying had fallen.

“Moreover, the rate of growth was solid and the fastest since May. The rise in input buying was mainly in response to higher new orders,” it said.

Yet, the PMI’s report stated that purchase prices were up amid currency weakness and higher costs for fuel and transportation.

It said: “The rate of inflation in overall input costs remained elevated in December despite slowing slightly for the second month running. More than 70 per cent of respondents signaled a rise in their input prices during the month. Strong inflation was recorded across all four monitored sectors, led by manufacturing.”

According to the report, exchange rate weakness and higher costs for fuel and transportation resulted in a further rapid rise in purchase prices at the end of 2024.

It explained that the rate of inflation remained among the strongest in the series history, despite easing slightly for the third consecutive month.

“In turn, companies continued to increase their output prices at a rapid pace, with the rate of inflation quickening slightly from that seen in November,” it said.

The Head of Equity Research West Africa at Stanbic IBTC Bank, Mr. Muyiwa Oni, attributed the increased productivity of the private sector to the economic activity usually associated with December Christmas and New Year festive seasons in Nigeria.

Oni said: “The private sector activity moved above the 50-points psychological threshold for the first time in six months, settling higher at 52.7 in December from 49.6 in November, which was its most pronounced improvement since January 2024.

“This improved private sector activity reflects renewed expansions in output, purchasing, and employment level. New orders also increased for the second consecutive month, with the latest increase being the highest since May 2024, reflecting improvement in consumer demand.

“Nonetheless, while some firms increased employment in response to the higher new orders, others reported having to let staff go due to difficulties paying wages. Elsewhere, output (54.8 points vs November: 49.6) ended a five-month sequence of decline, with survey participants linking the rise in activity to increased customer numbers.”

He added that growth was recorded across each of the four broad sectors covered by the survey even though input prices remained elevated in December.

He said: “Prices increased across all four monitored sectors, with the most pronounced increase in the manufacturing sector. As a result, output prices also remained elevated in December and ticked higher from that seen in November.”

Oni shared the expectation that the broad economy is likely to maintain the Q3:24 growth momentum in Q4:24, supported by festive-induced increase in economic activity and sustained improvement in crude oil production.

“On balance, we estimate the economy to grow by 3.24 per cent y/y in real terms in Q4:24 and adjust our 2024 growth estimate upward to 3.2 per cent (previously: 3.1 per cent). Over the medium term, some firms were optimistic of improvements in access to funding, helping them to invest in business expansions, while others were hopeful of an improvement in economic conditions in 2025, and reduced inflationary pressure,” he said.