PMI Up: Private business sees modest expansion
Nigeria’s private business sector entered its second month of expansion in September, with the Purchasing Managers’ Index (PMI) increasing from 50.2 in August to 50.5 in September, according to the Central Bank of Nigeria’s (CBN) business survey.
The over 50 index point in the PMI suggests that the economy is growing, but at a slower and steady pace. This can be a positive sign of stability, especially as the business environment is recently recovering from contraction.
Also, it might imply that private businesses have adjusted their operations to the changing macroeconomic environment to encourage expansion.
On a year-on-year basis, the PMI has increased by 11% or 5 points. It increased from 45.5 points in September 2023 to 50.5 points in September 2024.
The private business environment experienced a period of contraction from July 2023 to July 2024. The last recorded expansion occurred in June 2023, prior to the renewed expansion observed in August and September 2024.
“An index above 50.0 points indicates an expansion in business activities, while below 50.0 points indicates a contraction in business activities. An index of 50.0 indicates a no-change situation,” as stated by CBN.
Although still in contraction, the industry sector showed modest growth between August and September 2024, with the PMI rising from 49.5 in August to 50.7 in September, signalling a shift towards expansion.
This growth was primarily driven by increased production (output), supported by a rise in new orders (demand) within the sector. Industrial production reached 50.7, its highest level since April 2024, when it stood at 51.4. New orders for products rose to 49.9, the highest in the past 16 months, reflecting strengthening demand.
Employment levels in the sector, while still contracting, improved from 47.5 in August to 48.2 in September, as businesses increased staffing to meet the higher production and demand levels.
The sector’s growth was driven by the increased output of key industries, such as chemical and pharmaceutical products, cement, fabricated metal products, non-metallic mineral products, plastics and rubber products, printing and related support activities, furniture, textiles, apparel, leather and footwear, as well as electricity, gas, steam, air conditioning supply, and construction.
The service sector maintained its expansionary momentum in September 2024, marking the fourth consecutive month of growth since May. The sector’s PMI rose from 50.7 in August to 51.0 in September, indicating continued expansion.
The growth in the service sector was primarily driven by a surge in new orders, which reached their highest level in 16 months. New orders for services increased from 47.1 in June 2023 to 52.2 in September 2024, reflecting strong demand.
However, the rate of growth in business activities slowed, with the index declining slightly from 51.3 in August to 50.9 in September. The key sub-sectors were information and communication, Finance and insurance, management of companies, real estate, rental and leasing, wholesale trade, motion pictures, cinema, sound recording and music production, arts, entertainment and recreation and educational services.
Despite this deceleration in business activities, the service sector saw a modest improvement in employment levels, rising from 49.2 in August to 49.5 in September 2024, signalling a reduction in the pace of job contraction.