PMI Report: Backlogs of Work Accumulate as Firms Face Difficulties in Paying Staff Wages

The Purchasing Manager Index (PMI) report of the Stanbic IBTC Plc for the month of January has stated that backlogs of work accumulated during the month under review as firms in the private sector of the Nigerian economy struggled to pay their staff wages.

The report also stated that the volume of employment declined in the manufacturing and agriculture, adding that overall input cost pressures were most pronounced in the manufacturing sector.

According to the PMI: “The recovery in the Nigerian private sector gathered momentum at the start of 2024, with rates of expansion in output and new orders accelerating sharply.

“Purchasing activity also expanded markedly, but difficulties paying staff meant that the rate of job creation eased, contributing to a rise in backlogs of work. Meanwhile, rates of inflation remained elevated but softened from December.”

The report said companies posted a solid increase in staff costs in January, with the rate of inflation broadly in line with that seen in December. According to respondents, wages were often raised in order to help employees with higher living costs, with transportation mentioned in particular.

It, however, stated that, “employment increased in the services, wholesale and retail categories, but decreased in manufacturing and agriculture,” adding that “a combination of recovering new order volumes and slower job creation meant that backlogs of work accumulated in January, the second month running in which this has been the case. Outstanding business rose slightly, but to a greater extent than in December.”

The report further stated that there were further signs in January that the rate of overall input price inflation has peaked as the pace of increase eased for the third month running and was the softest since June last year.

It added, “The latest rise in input costs was still among the fastest on record; however, as close to 55 per cent of respondents posted an increase. Overall input cost pressures were most pronounced in the manufacturing sector.”

The report said output prices also increased during the month under review due to the pass through effect of higher input costs to customers, which resulted in a further sharp increase in output prices in January.

“Also in line with the picture for input prices, however, the rate of charge inflation eased and was the slowest since May last year. Selling prices rose most quickly in the wholesale & retail and manufacturing categories,” the report said.

It added that purchase prices were still up rapidly at the start of the year, due to currency weakness and higher prices for fuel and raw materials.

Commenting on the report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Mr. Muyiwa Oni, said that the recovery in the Nigerian private sector gathered momentum at the start of 2024, with rates of expansion in output and new orders accelerating sharply.

Oni said: “The headline PMI rose to 54.5 in January from 52.7 in December, above the 50.0 no-change mark for the second month running and signaling a solid improvement in the health of the private sector. In fact, the strengthening of business conditions was the most pronounced in just over a year.

“The recovery in new orders which began in December gathered momentum in January amid reports from panelists of strengthening demand. New business increased sharply, and to the largest degree since April 2022.

“Business activity also rose for the second successive month in January and at the fastest pace in 21 months. All four broad sectors covered by the survey posted improvements in output.”

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings