Cash Crisis: Private Sector Productivity Declines

 

Since the Stanbic IBTC Bank Purchasing Managers’ Index (PMI) declines to 42.3 points as at last month, the private sectors productivity in Nigeria have been going through a lot due to the cash crunch.

Speaking on the recent records by the headline of  PMI , as at February we have 44.7% which declined to 42.3%in March which has been affecting the private sector in their business. 

According to the headline figure derived from the survey is the Purchasing Managers’ Index (PMI). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 shows that there is decrease in the production.

According to Stanbic ITBC Bank: “the cash crisis in Nigeria continued to have a severe impact on business conditions in the private sector during March. In fact, output and new orders fell more quickly than in February, while staffing levels and purchasing activity were scaled back again.

“While input costs and output prices continued to rise sharply, rates of inflation softened. Output prices increased at the softest pace in almost three years. Meanwhile, suppliers’ delivery times shortened after having lengthened in February.

“As was the case in February, there were widespread reports from companies that customers were unable to commit to spending given cash shortages. This led to a substantial decline in new business, with the pace of contraction more pronounced than in the previous survey period.

”Companies reduced staffing levels slightly for the second month running, in part reflecting lower workloads but also due to difficulties paying wages. Lower workforce numbers limited the pace of staff cost inflation, which eased to a marginal rate that was the slowest since January 2021,” it added.

Muyiwa Oni, the head of Stanbic Bank stated that, “Stanbic IBTC Bank headline PMI declined to 42.3 in March from 44.7 in February, the second consecutive contraction in private sector business conditions in over two years.

“The continuous decline relative to February reflects the negative impact of cash shortage across different segments of the economy over the past two months. Currency in circulation declined by 58 per cent in January 2023 to N1.39 trillion from N3.01 trillion in December 2022, while currency outside the banks declined by 72 per cent in January 2023 to N789 billion from N2.57 trillion in December 2022.

Muyiwa also said, “nevertheless we expect an improvement in economic conditions given that the Central Bank of Nigeria has stepped back on the cashless policy and is steadily increasing the volume of cash in the economy following the directives from the courts.

“However, these readings indicate that reported GDP figures for Q1, 2023 will be weak and broadly behind our expectations of 2.4 per cent. We project the Nigerian economy growing at three per cent in 2021"Muyiwa said.