The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) report for February showed that the scarcity of naira notes throughout the country could have negative effect on the private sector midway through the first quarter of 2023.
According to the report, PMI sank to 44.7 in February of 2023, from 53.5 in the previous month.
The report also stated that persistent fuel shortages saw petrol pump prices increase, which added to price pressures and led to supplier delivery delays.
Steep reductions in output and new orders were observed, attributed to the cash shortage challenges experienced across the country during the month.
Consequently, firms scaled back their purchasing activity and employment.
“The headline PMI dropped below the 50.0 no-change mark in February, posting 44.7 from 53.5 in January. Business conditions deteriorated markedly, ending a 31-month sequence of expansion.
“The decline in operating conditions was the sharpest since the survey began in January 2014, excluding the opening wave of the COVID-19 pandemic in the second quarter of 2020.
“The most severe impacts of cash shortages were seen with regards to output and new orders, which both fell substantially as customers were often unable to secure the funds to commit to spending.
“The decline in new orders was the first since June 2020, while the fall in output ended a seven-month sequence of growth. In both cases, the reductions were the most pronounced in the survey’s history, apart from during the opening wave of the COVID-19 pandemic.
“With new orders and output falling, companies reduced their input buying and staffing levels accordingly. The declines were the first in 32 and 25 months respectively. The decrease in purchasing reflected not only a drop in customer demand, but also difficulties for companies to find the funds to pay for items,” the PMI report stated.
