Cash Crunch: Business Performance Index Drops To 44.7 Points In February

Cash Crunch: Business Performance Index Drops To 44.7 Points In February.

Cash shortages in the Nigerian economy severely impacted the private sector in the middle of the first quarter of this year as business activity slowed in February 2023.

The Stanbic IBTC Purchasing Managers’ Index (PMI) report also noted that while both production and new orders fell sharply, firms cut purchasing activity and hiring, pointing to pricing pressures and delays in deliveries from suppliers.

The headline figure derived from the survey is the Purchasing Managers’ Index (PMI) dropped below the 50.0 no-change mark in February, posting 44.7 from 53.5 in January. Business conditions deteriorated markedly, enThe report stated that, “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 adding a 31-month sequence of expansion.

“The most severe impacts from cash constraints were seen in production and new orders, both of which declined significantly as customers often were unable to secure funds for spending. It was the first time since June 2020 that the decline in production ended a seven-month streak of growth, both in the history of the survey except for the first wave of the COVID-19 pandemic. It was the steepest drop.

“As orders and production declined, firms cut purchases and labor accordingly. The declines were the first in 32 and 25 months, respectively. rather, it reflects the difficulty companies have in raising funds to pay for the items.
“In addition to liquidity bottlenecks, the private sector was also affected by the fuel shortage in February. It has grown the most. Stock Market Ends Winning Streak, Lose N162bn

“Fuel shortages, in turn, led to higher fuel costs, which were widely cited as the cause of further significant increases in purchase prices. Higher raw material costs and a weaker currency also contributed to higher purchase prices. Inflation, the lowest since June 2020, remains outstanding and is stronger than the series average.Labor costs also rose again in February, albeit at a moderate pace.
“Production prices rose sharply again, the weakest in four months, as higher input costs were passed on to customers,” it said.

It hopes that economic conditions will improve, alongside business expansion and investment plans, thereby, leading to confidence in the year-ahead outlook for business activity, saying, sentiment was at a five-month high but still relatively muted.