Naira Scarcity: Report says private businesses may suffer in Q1

According to data from the Stanbic IBTC Bank's February Purchasing Managers' Index, the private sector may have suffered midway through the first quarter of the year as a result of the nationwide cash shortage in February.

You may remember that Nigerians experienced a fuel and naira shortage in February.

Part of the report read, “The headline PMI dropped below the 50.0 no-change mark in February, posting 44.7 from 53.5 in January. Business conditions deteriorated markedly, ending a 31-month sequence of expansion.

“The decline in operating conditions was the sharpest since the survey began in January 2014, excluding the opening wave of the COVID-19 pandemic in the second quarter of 2020.

“The most severe impacts of cash shortages were seen with regards to output and new orders, which both fell substantially as customers were often unable to secure the funds to commit to spending.

It added that “The decline in new orders was the first since June 2020, while the fall in output ended a seven-month sequence of growth. In both cases, the reductions were the most pronounced in the survey’s history, apart from during the opening wave of the COVID-19 pandemic.

“With new orders and output falling, companies reduced their input buying and staffing levels accordingly. The declines were the first in 32 and 25 months respectively. The decrease in purchasing reflected not only a drop in customer demand but also difficulties for companies to find the funds to pay for items.”

The report also demonstrated how a lack of money increased the price of fuel and the operating expenses of companies and organizations.

“Higher raw material costs and currency weakness were also factors pushing up purchase prices.

“The rate of inflation was the softest since June 2020, but marked nonetheless and stronger than the series average. Staff costs also rose again in February, but at a modest pace,” the report added.