The private sector suffered a sharp decline in business activity in February as companies reduced output and cut jobs because of cash and fuel shortages.
This is according to the Purchasing Managers’ Index compiled by S&P Global, which gauges the level of activities in the real sector.
The headline PMI dropped below the 50.0 no-change mark in February, posting 44.7 from 53.5 in January as 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.
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“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. 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,” it said.
The report stressed that 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.
With new orders and output falling, it noted that companies reduced their input buying and staffing levels accordingly, leading to a marginal monthly reduction in employment, the first decrease in just over two years.
“The fall reflected the challenges in the Nigerian economy, but was only marginal as the vast majority of respondents (96%) kept their staffing levels unchanged,” it added.
Nigerians have endured cash shortage since the Central Bank of Nigeria introduced the cashless policy as well as redesign of three bank notes in December 2022.