Nigerian businesses are ramping up their stock levels in anticipation of strong consumer spending during the upcoming Christmas season, driven by a sustained period of growth in new orders. This optimistic activity has kept the country's Purchasing Managers' Index (PMI) firmly in expansion territory.
Steady Growth Despite Slight Moderation
The headline PMI compiled by Stanbic IBTC Bank registered 53.6 points in November 2024. This marks a slight easing from the 54.0 points recorded in October but remains well above the crucial 50-point threshold that separates economic expansion from contraction. Notably, this is the 13th consecutive month the index has signaled an improvement in business conditions across Nigeria's private sector.
The sustained growth is attributed to several key factors. Easing inflationary pressures have provided significant relief, allowing businesses to plan with more certainty. Furthermore, successful launches of new products and a noticeable expansion in customer demand across several vital sectors have fueled the positive trend.
Sector Performance and Inflation Relief
The growth in output was broad-based, with manufacturing and services identified as the primary drivers in November. Agriculture, wholesale, and retail trade also contributed to the strong performance. Companies reported that higher sales volumes, an increase in their customer base, and innovative product offerings were key to their success.
A major highlight from the November report is the clear signs of cooling inflation. Input costs rose at the slowest pace in almost five years, with softer increases in both purchase prices and labour expenses. This enabled firms to manage their costs more effectively.
Similarly, the rate of increase in output prices softened for the sixth time in seven months, reaching its weakest point since April 2020. This trend allows businesses to compete on sales volume rather than solely on price margins, potentially stimulating further market activity.
Inventory Buildup and Cautious Hiring
In response to the positive demand outlook, especially for the festive period, purchasing activity by companies surged to a seven-month peak in November. This led to the fastest accumulation of stocks since June 2023, indicating strong confidence in continued consumer spending.
However, the report also noted areas of caution. Employment growth slowed to a marginal pace, suggesting that businesses are hesitant to expand their workforce aggressively despite rising activity. Additionally, backlogs of work increased for the first time in four months, partly due to delays in customer payments. On a positive note, supplier delivery times improved for the fifth month in a row, easing some supply chain pressures.
Optimistic Outlook for 2025
Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, commented on the findings. He linked the sustained rise in new orders and output to the benefits of easing inflation, supported by government infrastructure investments, trade facilitation, and the ongoing positive impact of the Dangote Petroleum Refinery.
"With inflation softening and the exchange rate gradually stabilising, sectors such as manufacturing, services, and retail are poised for stronger performance in 2025," Oni stated.
Looking forward, Stanbic IBTC projects the Nigerian economy will grow by 4.0 per cent in 2025, with manufacturing and services expected to lead this expansion. The combination of lower interest rates, contained inflation, and a stable exchange rate is anticipated to further stimulate private consumption and business investment into 2026, broadening economic growth and improving living standards.
