Nigeria’s private sector continues to face severe challenges as rising inflation, fueled by naira depreciation and escalating fuel prices, hampers economic activities. According to the November 2024 Purchasing Managers’ Index (PMI) report released by S&P Global, businesses are grappling with soaring input costs, constrained purchasing power, and declining demand.

The PMI for November registered a slight improvement at 49.6 compared to October’s 46.9, signaling a slower pace of contraction. However, steep price pressures persist, stifling private-sector growth. “The less pronounced deterioration in business conditions partly reflected a renewed expansion in new orders, though elevated prices still deterred many customers,” the report highlighted.

Inflation Drives Decline in Employment and Services Sector
For the first time in seven months, employment levels dropped, with the services sector witnessing the most significant layoffs. Rising costs have forced many businesses to scale back operations, struggling to maintain workforce levels amid economic strain.

“The inflationary environment has created significant strain for businesses, with some unable to maintain workforce levels,” the report noted, further emphasizing the impact of high fuel and raw material prices on purchasing costs and overall business sustainability.

ALSO READ: Naira Strengthens Against Dollar in Latest FX Market Movement

Mixed Sectoral Performance Amidst Rising Costs
While agriculture and manufacturing sectors managed to achieve modest output growth, wholesale, retail, and services sectors experienced notable declines. Businesses reported sharp increases in operational expenses, including staff costs, as companies attempted to support employees coping with higher transportation and living costs.

In response, firms significantly raised output prices to offset input costs, yet this only worsened the muted demand environment. Many businesses reduced purchasing activities, scaled down inventories, and, in some cases, cut back operations entirely.

Optimism in Uncertain Times
Despite the bleak conditions, some business owners remain hopeful. “We are optimistic that strategic investments and planned expansions will position us better for the coming months,” a business owner stated. However, the report underscored record-low business confidence due to lingering concerns about inflation and economic uncertainties.

Bright Spot in Supplier Dynamics
The report noted an improvement in supplier delivery times, attributed to better road conditions, faster payments, and increased competition among vendors. While this offered some relief, it was insufficient to counteract the broader challenges weighing on Nigeria’s private sector.