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 over three years.
S&P Global’s Purchasing Managers’ Index shows that Nigeria’s PMI decreased from 53.5 the previous month to 44.7 in February. From the peak of the coronavirus epidemic in June 2020, this record has been the worst.
S&P Global compiles purchasing managers’ index data for more than 40 markets throughout the world. The monthly statistics come from polls of top executives of private sector businesses.
The Manufacturers Association of Nigeria stated last month that the present shortage of naira notes has a detrimental effect on company operations by obstructing the normal flow of commodities.
The President of the association, Francis Meshioye, stated this during an interaction with journalists in Lagos.
According to him, the current naira scarcity and the pressure the cash crunch has put on online transactions have negatively affected the free flow of goods.
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.
Speaking exclusively with The ANAEDOONLINE on the factors that contributed to the drastic decline of the PMI in February, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, cited the uncertainty surrounding the general elections and naira scarcity as primary contributors to the decline.
According to him, the retail end of the supply chain maintains a strong relationship with the manufacturing sector. Hence, the cash scarcity in many ways negatively affected the fall in PMI.
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Yusuf said, “The elections and all the uncertainty that came with it was a factor that caused a decline in the PMI. You know, normally when you have elections, there are all sorts of uncertainties. Also, you know we have a cash crisis.
“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 the same vein, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the interplay of general elections, naira scarcity and forex crisis caused the decline in the PMI.
Idahosa said, “There are a whole lot of factors. There is the naira crunch. There is the lingering foreign exchange crunch. There is the fuel supply jeopardy. You know that manufacturers, they need all of these. On top of it, there is the election season. So, there are so many things putting pressure on manufacturing. It is not a surprise that it is down.”
Idahosa said it was important for the business community to quickly recover from the election-induced hibernation to ensure that March and April do not experience a similar contraction.
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