Saturday, 06 March, 2021

Business activity rises for first time in four months, Reports Says


Stanbic IBTC Bank Nigeria PMI®

Key findings

Output and new orders return to growth

Employment continues to fall

Record rises in input costs and output prices

Data were collected 13-29 July 2020

The Nigerian private sector returned to expansion during July, following three successive months of decline. Both business activity and new orders increased, but the severity of the coronavirus disease 2019 (COVID-19) downturn meant that spare capacity remained evident, leading to a further reduction in employment.
The recent surge in prices extended into the second half of the year, with overall input prices rising at the sharpest pace in the survey’s history. In response, firms also raised their output prices at the fastest rate since the survey began in January 2014.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®), a property of Stanbic IBTC Bank PLC.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI posted 50.4 in July, up from 46.4 in June and above the 50.0 no-change mark for the first time since March. That said, the reading signalled only a slight improvement in business conditions following a severe downturn due to the COVID-19 pandemic.
Signs of improving demand were central to a strengthening of business conditions. New orders increased for the first time in four months. Business activity also returned to growth for the first time since March on the back of higher new orders and an easing of the lockdown. That said, the

sa, >50 = improvement since previous month

Sources: Stanbic IBTC Bank, IHS Markit.
expansion in July was relatively modest.
Despite new orders increasing in the latest survey period, steep declines in previous months meant that excess capacity was still evident. Backlogs of work decreased for the second month running, while firms continued to lower their staffing levels. Employment fell for the fourth successive month, but the rate of job cuts softened from June’s record.
The rate of overall input cost inflation was the sharpest in the survey’s history amid an unprecedented rise in purchase prices. Respondents linked higher purchase costs to currency weakness and shortages of raw materials. Meanwhile, staff costs continued to fall, with panellists reporting wage reductions.
In response to sharply rising cost burdens, companies increased their own selling prices. Moreover, the rate of inflation was the fastest since the survey began in January 2014.
Signs of improving customer demand led companies to expand their purchasing activity and inventory holdings, in both cases for the first time in four months. Stockbuilding efforts were aided by quicker suppliers’ delivery times, reflecting the removal of restrictions on interstate travel and competition among vendors.
Business confidence improved from June’s record low,

Gbolahan Taiwo, Economist at Stanbic IBTC Bank commented:
“Business activities in the Nigerian private sector returned to expansion territory for the first time since March as output and new orders improved. The PMI rose to 50.4 in July from 46.4 in June. Recall the Nigerian government started to ease the Covid-19 containment measures in early May and that has brought about some resumption to economic activities albeit slowly. The output and new orders sub-index expanded for the first time in 4 months at 52 and 52.5 respectively. Although we expect business activities in the Nigerian private sector will continue to improve over the coming months, the overall economy will likely still fall into a recession as some parts of the economy, particularly the services sector will still struggle to recover perhaps until a vaccine is found. Also, despite the expected quarter-on-quarter growth, the higher base from last year will ensure a year-on-year contraction. On a negative front, the Employment index remains below the expansion mark of 50 for the fourth consecutive month as companies continue to reduce staffing owing to Covid-19 disruption to economic activities. This will continue to impact negatively on the demand side of growth as aggregate demand and purchasing
power of the consumer will remain under pressure.”

The Stanbic IBTC Bank Nigeria PMI® is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.
Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.
The headline figure is the Purchasing Managers’ Index™ (PMI). The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.
Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
July data were collected 13-29 July 2020.
For further information on the PMI survey methodology, please contact

About PMI
Purchasing Managers’ Index™ (PMI®) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.

Stanbic IBTC Bank
Gbolahan Taiwo
Economist, Research T: +234 (1) 422 8290
IHS Markit
Usman Imanah
Communications Manager T: +234 7066 3172 67

Andrew Harker
Economics Director T: +44 1491 461 016
Katherine Smith
Public Relations T: +1 781 301 9311

About Stanbic IBTC Bank
Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings Plc, a full service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. Standard Bank Group, to which Stanbic IBTC Holdings belongs, is rooted in Africa with strategic representation in 20 key sub-Saharan countries and other emerging markets; Standard Bank has been in operation for over 151 years and is focused on building first-class on-the-ground banks in chosen countries in Africa and connecting other selected emerging markets to Africa and to each other.

About IHS Markit
IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.
IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2020 IHS Markit Ltd. All rights reserved.
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Please note that the Stanbic IBTC Bank Nigeria PMI should not be taken as a substitute for official statistics, but may be used in conjunction with them.
Stanbic IBTC Bank Nigeria (“Stanbic IBTC”) has issued and is responsible for production of this publication. This publication should be regarded as being for information only and should not be considered as an offer or solicitation to sell, buy or subscribe to any financial instruments, securities or any derivative instrument, or any other rights pertaining thereto (together, “investments”). Stanbic IBTC does not express any opinion as to the present or future value or price of any investments referred to in this publication. This publication may not be reproduced without the consent of Stanbic IBTC.
The information contained in this publication has been compiled from sources believed to be reliable, but, neither Stanbic IBTC, nor any of its directors, officers, or employees accepts liability for any loss arising from the use hereof or makes any representations as to its accuracy and completeness. The information contained in this publication is valid as at the date of this publication. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the matters discussed herein.
This publication does not constitute investment advice and has been prepared without regard to individual financial circumstances, objectives or particular needs of recipients. Readers should seek their own financial, tax, legal, regulatory and other advice regarding the appropriateness or otherwise of investing in any investments or pursuing any investment strategies. Investec operates exclusively on an execution only basis.
An investment in any of the investments discussed in this publication may result in some or all of the money invested being lost. Past performance is not a reliable guide to future performance. To the extent that this publication is deemed to contain any forecasts as to the performance of any investments, the reader is warned that forecasts are not a reliable indicator of future performance. The value of any investments can fall as well as rise. Foreign currency denominated investments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such investments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors.
The intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index™ and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates.

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