Economy contracts in October as soaring prices, weak Naira take hold – Report

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BY FESTUS OKOROMADU, ABUJA

Economic activities in the Nigerian private sector experienced a contraction in October, according to the Cowry Monthly Economic and Financial Markets Report for October 2023 released on Wednesday.

The report published by Cowry Assets Management Limited, attributed the contraction to soaring input costs which weighed on customer demand.

“Rapidly rising prices discouraged firms from purchasing inputs and caused order completion delays,” the report stated.

But it noted that despite these challenges, employment continued to rise due to company expansion plans.

“In the month, the headline PMI dropped below 50.0 for the first time in seven months, signaling deterioration in private sector business conditions at 49.1, down from September’s 51.1. The primary challenge for firms was the sharpest increase in overall input prices in nearly a decade, driven by currency weakness and the removal of fuel subsidies.

“As living costs, particularly related to transportation, rose, companies increased staff pay considerably. This sharp inflationary environment led to a decline in customer demand in October, ending six months of growth in new business.”

The report also hinted that business activity also declined, marking the second drop in three months, and to the greatest extent since earlier in the year.

“Reduced new orders and high input prices led companies to reduce purchasing activity for the first time in seven months, causing project delays in some cases. Outstanding work increased for the second month, reflecting customer payment delays, despite continued employment growth.

“Staffing levels rose for the sixth consecutive month, often driven by business expansion plans. While hopes for expansion and new branches supported future output optimism, overall sentiment remained relatively muted.

“Finally, suppliers’ delivery times improved in October, linked to supplier competition, prompt payments, and less road congestion,” the report stated.