In October, Nigerian businesses experienced a profound contraction in activity, a stark reflection of the prevailing inflationary pressures and rising operational costs.
According to the latest Stanbic IBTC Purchasing Managers’ Index (PMI), business activity plunged to 46.9, down from 49.8 in September—the sharpest decline in 19 months and the most severe deterioration since March 2023.
Analysts point to a relentless increase in overall input costs as the primary driver of this downturn.
The report highlights that input prices surged at one of the fastest rates in the survey’s history, compelling many companies to raise their selling prices significantly.
“The rise in operational costs is unsustainable for many businesses, particularly smaller firms that lack the buffer to absorb such increases,” noted David Adetunji, an economic analyst at a leading financial institution.
This environment of rising costs has resulted in a notable decrease in new orders and overall business activity, with the business sentiment index reaching an all-time low.
“The sharp increase in prices is forcing consumers to reconsider their spending habits, which in turn is impacting business orders,” commented Kemi Ojo, a senior economist at an international consultancy firm.
The escalation in purchasing costs has been fueled by a combination of a weakening currency and rising fuel and transportation expenses.
Analysts point out that these factors have significantly eroded consumer purchasing power. As businesses quickly increased their selling prices to cope, they inadvertently reduced customer demand.
For the first time in three months, new orders decreased, suggesting that consumers are feeling the strain of heightened prices.
“This decline in demand reflects a cautious consumer base that is reacting to inflationary pressures,” remarked Tunde Bakare, a market strategist.
The PMI report explicitly states, “Overall input prices surged higher, marking the third-fastest rise in the survey’s history.”