June data revealed a positive end to the first half of 2021 with a solid expansion recorded in the Nigerian private sector. Greater client demand in both domestic and international markets led to a sharp and accelerated rise in new orders. That said, output, purchasing and employment growth softened during the month. Meanwhile, firms reduced their backlogs at the second most marked rate in the series.
Sentiment regarding output in the year ahead was weak in the context of the historical average, but firms continued
to foresee a rise in output by June 2022. On the price front, overall input price inflation was robust, but eased to
the softest since December 2020 despite a sharper rise in purchase costs.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
At 53.6 in June, down from 54.4 in May, the headline PMI registered a solid rate of growth, but one which moderated
from May’s nine-month peak. The latest uptick extended the period of expansion to 12 consecutive months, however.
New order inflows rose strongly in June, with the pace of expansion quickening to the fastest since January 2020. Greater client demand was often mentioned by respondents. International demand for Nigerian goods and
services also increased, and at the fourth-quickest rate in the series.
Although client demand rose at a sharp and accelerated pace, output growth moderated in June. The rate of
expansion was still solid but posted below the long-run series average. Sector data revealed services recorded the
sharpest increase in activity followed by wholesale & retail and manufacturing respectively. Agriculture meanwhile
registered a fractional rise.
To support higher output, firms engaged in buying activity with growth now seen in each month since July 2020.
Inventories also rose at a similar pace, though the rate of expansion softened in both.
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Workforce numbers rose marginally in June, which coincided with only a slight rise in staff costs. Amid efforts
to keep on top of an outstanding business, backlogs fell at the second most marked rate in the series, surpassed only by that seen in February.
On the price front, higher raw material costs underpinned a rise in purchase prices which quickened to a three-month
high. Overall input prices rose sharply, though at the softest rate since December 2020. Higher prices were passed on
to clients, with the rate of charge inflation robust overall.
Finally, firms remain optimistic about their output prospects over the year ahead, but the degree of positivity was far
below the series average in June.
Comment
Gbolahan Taiwo, Economist at Stanbic IBTC Bank commented: “Although the Stanbic IBTC PMI moderated to 53.6 in
June from 54.4 in May, Nigerian private sector activity remained strong with the index registering a score
above 50 for the 12th consecutive month. Of course, unwinding base effects from the contraction of economic
activities last year will ensure a more robust growth for the services sector this year and a survey showed that the
services sector recorded the sharpest increase in activity this month. It is very likely that economic growth will be
protracted this year across most economies owing to the rapidly evolving nature of the pandemic.
The rapid global vaccination drive across most global economies have yielded some fruit but Africa is largely lagging. To that effect, we have seen some economies across the continent institute some level of public health restrictions
amid a third wave of the pandemic. Interestingly, daily Covid-19 infection numbers in Nigeria still remain low and
hence talks about new public health restrictions have been very muted. However, given the fact that the country’s
land and air borders remain largely open, there remains a risk of third-wave stemming from imported cases. In
that instance, a return to more stringent public health restrictions could tame the continued recovery expected
this year.”
