The Stanbic IBTC’s Purchasing Power Index, PMI, data published yesterday, has revealed that the removal of Nigeria’s fuel subsidy may have reduced business confidence in June 2023 as inflationary pressures rose.
According to the study, although they had slowed down, output growth and new order growth both continued to be significant.
“Business optimism dropped to almost record-low levels.
“Companies increased their stockpiles in an effort to prepare for future price hikes as a result of the increased inflationary pressures. Employment, meanwhile, increased modestly for the second consecutive month.”
A PMI rating above 50.0 indicates an improvement in business conditions from the previous month, while a reading below 50.0 indicates a decline.
According to the report: “While the state of the economy as a whole continued to improve, enterprises had to deal with a considerably more intense inflationary environment towards the end of the second quarter of the year as a result of the elimination of the gasoline subsidy.”
The rate of selling price inflation accelerated quickly to the highest in the year to date as firms passed higher expenses on to their customers, while purchase prices grew at the fastest rate since last August.
The speed of output growth was reportedly constrained by concerns over the termination of the gasoline subsidy, despite the fact that activity increased significantly during the most recent survey period, according to respondents.
“Despite the fact that activity was still significantly higher during the most recent survey period, issues related to the removal of the fuel subsidy reportedly had an impact on the pace of output increase.
“Increasing client numbers and an increase in new orders have caused output to increase each of the last three months. Wholesale and retail reported decreased activity, going against the general trend.
“New business increased for the third consecutive month as well. Although it was the slowest in the current series of growth, the rate of expansion was noticeable.
For the second month in a row, higher new orders prompted businesses to increase employment, however, the rate of job growth was once more slow. Due to an increase in new business and certain challenges in securing inputs, businesses experienced a build-up of backlogs of work despite raising workforce numbers.
Some businesses claimed to have accelerated purchases and increased stocks in anticipation of projected rises in material costs in the months to come.
