According to a Stanbic IBTC analysis, cash shortages cause a dramatic reduction in economic activity.

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According to Stanbic IBTC Bank, the February PMI data showed that the private sector in Nigeria was negatively impacted by cash shortages at the halfway point of the first quarter of the year.

According to the data that was released yesterday, there were significant drops in productivity and new orders, and businesses also reduced hiring and purchasing.

Fuel shortages also had an impact on businesses, adding to pricing pressure and delaying supplier deliveries, the report states.

The Purchasing Managers Index, or PMI, is the survey's key statistic. Numbers over 50.0 indicate that business conditions have improved during the previous month, while readings below 50.0 indicate a worsening.

The headline PMI fell below the no-change threshold of 50.0 in February, reporting 44.7 compared to 53.5 in January, according to the report.

"A 31-month stretch of expansion came to an end when business circumstances sharply deteriorated. With the exception of the COVID-19 pandemic's initial wave in the second quarter of 2020, the drop in operating conditions was the most severe since the survey's start in January 2014.

"Output and new orders suffered significantly as a result of cash shortages since customers were frequently unable to get the monies necessary to commit to spending, which had a negative impact on both. While the drop in output put a stop to a seven-month streak of increase, the reduction in new orders was the first since June 2020. Except for the first wave of the COVID-19 pandemic, the decreases in both cases were the sharpest in the survey's history.

Companies cut back on input purchases and workforce levels in response to declining new orders and output.

The report continued, "The decline in purchases reflected not just a decline in client demand but also challenges faced by businesses in raising money to pay for goods. In February, the private sector also experienced a fuel shortfall in addition to financial problems. This had a significant influence on suppliers' delivery schedules, which increased to the highest extent since April 20 and for the first time in over six and a half years.

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