Nigeria’s Purchasing Manager Index, PMI, which measures the prevailing direction of economic trends in manufacturing sector, shrank for the second month in a row in March, 2023 no thanks to the lingering cash crunch in the country.
A Stanbic IBTC Bank report indicated that the countrys factory activity was 42.3 for March, sloping from 44.7 for February which are both below 50 and above set as standard for healthy and growing manufacturing sector.
According to the latest edition of Stanbic IBTC Bank Nigeria PMI, “The continuous decline relative to February reflects the negative impact of cash shortage across different segments of the economy over the past two months.”
“Currency in circulation declined by 58% in January 2023 to N1.39tn from N3.01tn in December 2022, while currency outside the banks declined by 72% in January 2023 to N789bn from N2.57tn in December 2022,” noted Muyiwa Oni, head of Equity Research West Africa at Stanbic IBTC Bank.
The contraction also meant that both staffing levels and purchasing activities fell.
The survey noted that output prices rose “at the softest pace in almost three years,” while suppliers’ delivery times reduced after having lengthened in the previous month.
It further observed that widespread reports by firms indicated that customers were unable to commit to spending in the face of the cash crunch, echoing a broader deterioration in business conditions within the private sector.
One of the major implications of that was a considerable plunge in new business, the survey said.
Challenges in paying workers wages were cited as a key reason companies chose to cut staff. Another was lower workloads.
“The cash crisis acted to dampen confidence in the private sector in March, with sentiment the second-lowest in the series history,” the survey stated.