According to a recent survey, businesses are reducing output and eliminating employment as a result of cash and gasoline shortages, marking the first contraction of the private sector in Nigeria in nearly three years.
S&P Global’s Purchasing Managers’ Index shows that Nigeria’s PMI decreased from 53.5 in the previous month to 44.7 in February. From the peak of the coronavirus pandemic in June 2020, this record has been the worst.
Purchasing Managers’ Index data are compiled by S&P Global for more than 40 economies globally. The monthly data are gathered from polls of top executives at private sector enterprises.
The Manufacturers Association of Nigeria stated last month that the present shortage of naira notes had a detrimental effect on company operations by obstructing the normal flow of commodities.
Francis Meshioye, the association’s president, said this while speaking with journalists in Lagos.
He claims that the current naira shortage and the strain it has placed on internet transactions have hurt the free flow of commodities.
He said, “I want to assume that this is a very short-term problem. It is general. Even if you want to do e-banking, there are some things you cannot do at the moment. We have problems, PoS is not working.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, discussed the factors that led to the sharp decline of the PMI in February in an exclusive interview with The PUNCH. He pointed to the uncertainty surrounding the general elections and the scarcity of the naira as the main causes of the decline.
He asserts that the supply chain’s retail component has a close tie with the manufacturing industry. Hence, the decline in PMI was adversely impacted by the cash shortage in various ways.
The elections and all the ensuing uncertainties, according to Yusuf, were a role in the PMI’s drop. You know, there are typically a lot of unknowns surrounding elections. You are also aware of our cash situation.
“The cash crisis was also a major problem. This affected the distributive trade sector. You know that whatever is produced has to be distributed. The retail end has a strong connection with the manufacturing end. If the retail end is not doing well as a result of the problem of cash that we experienced, the manufacturing PMI will be affected. There will be a knock-on effect. So, the cashless policy and the mopping up of cash in the economy affected distributive trade and the retail end of the economy.”
He added, “You know this thing started about a month before the election. Purchasing power was weakened. People didn’t have cash for transactions. The adverse effect that took place as a result of the cash crisis also contributed to it. So, I think it is a combination of the cash crisis and the uncertainty surrounding the elections that caused it.”
In a similar vein, Gabriel Idahosa, Deputy-President of the Lagos Chamber of Business and Industry, claimed that the PMI’s decrease was caused by the interaction of the general elections, naira scarcity, and the FX crisis.
There are many different elements, according to Idahosa. The naira crunch exists. The ongoing foreign exchange crisis is one of them. The gasoline supply is in danger. Manufacturers require all of these, as you are aware. The election season is an additional factor. Hence, manufacturing is under pressure from a variety of sources. That it is down is hardly surprising.
In order to prevent a contraction in March and April, according to Idahosa, the business community must swiftly emerge from the election-related lethargy.
