Melvin Onwubuke
Nigeria businesses are faced with the highest increase in input cost in a decade, as a result of the weakness in the exchange rate for February.
This is according to Stanbic IBTC Purchasing Managers Index, report for February 2024.
In the report, Nigeria’s Business Purchasing Managers Index fell sharply from 54.5 in January, to 50.1 for the month and business conditions recorded their weakest improvement since December of last year.
The report stated “The headline PMI dropped markedly in February to 51.0 from 54.5 in January, remaining above the 50.0 no-change mark for the third month running but only just.
“Input costs surged higher in February, often as a result of exchange rate weakness, which drove up material costs, but also higher fuel prices.
“The latest rise in overall input costs was by far the sharpest since the survey began in January 2014, with around 78% of respondents signaling an increase over the month.”
Furthermore, the Stanbic PMI for February pointed out that business owners have transferred higher input costs to their customers, leading to output inflation. Also, the reduction in new orders by businesses was another consequence of the record increase in input costs.
In his remark, Muyiwa Oni, Head of Equity Research at Stanbic IBTC bank stated that the increase in input cost as a result of currency depreciation and increase in transport cost may harm growth in the first quarter of the year- projecting economic growth for 2024 at 2.9%.
He said, “Furthermore, price pressures remain biased to the upside over H1:24 and tight monetary conditions could constrain business investments.”
“Notably, interest-rate sensitive sectors like manufacturing, construction, real estate, and trade are likely to see a moderation in growth levels relative to the prior year.
“Accordingly, the non-oil sector’s growth is on track to moderate in 2024 compared to 2023. We project the Nigerian economy will grow by 2.9% in 2024,” he added.
