Nigeria’s private sector activity has contracted for the first time in almost three years as companies reduce output and cut jobs owing to cash and fuel shortages, a new report has revealed.
According to Purchasing Managers’ Index compiled by S&P Global, Nigeria’s PMI fell to 44.7 in February from 53.5 the month before. It’s the worst record since the height of the coronavirus pandemic in June 2020.
Purchasing Managers’ Index data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies.
Last month, the Manufacturers Association of Nigeria said that the current scarcity of naira notes had negatively impacted business activities by disrupting the proper flow of goods.
The President of the association, Francis Meshioye, stated this during an interaction with journalists in Lagos.
According to him, the current naira scarcity and the pressure the cash crunch has put on online transactions have negatively affected the free flow of goods.
He said, “I want to assume that this is a very short-term problem. It is general. Even if you want to do e-banking, there are some things you cannot do at the moment. We have problems, PoS is not working.
Speaking exclusively with The PUNCH on the factors that contributed to the drastic decline of the PMI in February, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, cited the uncertainty surrounding the general elections and naira scarcity as primary contributors to the decline.
According to him, the retail end of the supply chain maintains a strong relationship with the manufacturing sector. Hence, the cash scarcity in many ways negatively affected the fall in PMI.
Yusuf said, “The elections and all the uncertainty that came with it was a factor that caused a decline in the PMI. You know, normally when you have elections, there are all sorts of uncertainties. Also, you know we have a cash crisis.
“The cash crisis was also a major problem. This affected the distributive trade sector. You know that whatever is produced has to be distributed. The retail end has a strong connection with the manufacturing end. If the retail end is not doing well as a result of the problem of cash that we experienced, the manufacturing PMI will be affected. There will be a knock-on effect. So, the cashless policy and the mopping up of cash in the economy affected distributive trade and the retail end of the economy.”
He added, “You know this thing started about a month before the election. Purchasing power was weakened. People didn’t have cash for transactions. The adverse effect that took place as a result of the cash crisis also contributed to it. So, I think it is a combination of the cash crisis and the uncertainty surrounding the elections that caused it.”
In the same vein, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the interplay of general elections, naira scarcity and forex crisis caused the decline in the PMI.
Idahosa said, “There are a whole lot of factors. There is the naira crunch. There is the lingering foreign exchange crunch. There is the fuel supply jeopardy. You know that manufacturers, they need all of these. On top of it, there is the election season. So, there are so many things putting pressure on manufacturing. It is not a surprise that it is down.”
Idahosa said it was important for the business community to quickly recover from the election-induced hibernation to ensure that March and April do not experience a similar contraction.
