Naira Weakness Fuels High Purchase Costs In August

The purchase cost inflation in Nigeria reached a five-month high in August 2024, primarily driven by the continued depreciation of the naira. This surge in costs has put significant pressure on businesses, leading to higher prices for consumers.

According to a report by Stanbic IBTC Bank, the rising prices of materials and transportation, combined with the weak naira, have forced companies to increase their output prices to offset rising costs. This has contributed to a deterioration in business conditions, as indicated by the Purchasing Managers’ Index (PMI) remaining below the 50.0 threshold.

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The report also highlighted that businesses are facing challenges in managing rising costs against a backdrop of weak demand. The persistent weakness in the USD/NGN exchange rate has made imports more expensive, further exacerbating inflationary pressures.

While firms remain cautiously optimistic about future output, they are facing increasing challenges in maintaining profitability in the current economic environment. The continued depreciation of the naira and rising costs are key factors contributing to these difficulties.