Elections that took place in Ghana in December caused a pause in business at some companies during the month, leading to slower growth of new orders and a dip in business activity, S&P said in a purchasing manager index report.

However, the report noted that employment and purchasing activity continued to rise and firms were increasingly optimistic regarding the year-ahead outlook. Input costs and output prices continued to rise sharply, but a recent improvement in the strength of the cedi acted to soften inflation.

The S&P Global Ghana Purchasing Managers’ Index™ ,PMI®, dropped below the 50.0 no-change mark in December, posting 49.4 from 52.5 in November. The latest reading signaled a slight worsening in the health of the private sector at the end of 2024, ending a two-month sequence of improvement.

According to the latest PMI report, the deterioration in overall business conditions in part reflected a first reduction in business activity for three months in December.

Although price pressures contributed to the fall, anecdotal evidence suggested that the drop in output could be temporary in nature, attributed to a pause in operations during the election period. Moreover, the reduction in activity was only slight as some firms continued to raise output in response to higher new orders.

‘New business increased for the third month running, albeit only fractionally. Some firms reported that an improvement in the strength of the cedi against the US dollar had helped them to secure new orders. This recent strengthening in the currency also acted to soften inflationary pressures slightly, with purchase costs rising at the slowest pace in nine months.

That said, purchase prices still increased markedly given a previous sustained period of currency depreciation and higher fuel costs. Staff costs meanwhile rose solidly, albeit at the weakest pace since January 2024.

With input prices still increasing sharply, companies raised their selling prices accordingly. The pace of charge inflation was above the series average. Companies continued to expand their staffing levels in December amid improvements in customer demand. Employment rose for the eleventh consecutive month, albeit at a softer pace.

Meanwhile, a further slight reduction in backlogs of work was registered. Purchasing activity was also up, and for the second month running. Respondents linked higher input buying to rising new orders and efforts to build safety stocks.

These attempts were often successful as stocks of inputs were accumulated for the third month in a row, albeit modestly. Firms made sure to pay for purchased items on time in order to secure delivery slots.

This, alongside competition among suppliers, meant that lead times shortened markedly in December, and to the largest extent since October 2023.

Companies were increasingly optimistic that business activity will rise over the coming year, with December seeing the strongest sentiment for six months. Confidence was also above the 11-year series average. Hopes for more stable prices and a boost to business conditions from the incoming government were among the factors supporting optimism”

By Charles Ebi

Nigeria’s foreign exchange ,FX, reserves have recorded an increase of $591.78 million in the month following the government’s $2.2 billion Eurobond auction on December 2, 2024.

The reserves rose from $40.292 billion on December 2 to $40.884 billion on January 3, 2025, reflecting a month-on-month growth of 1.47%.

This growth highlights the effectiveness of the country’s strategic measures in stabilizing its foreign exchange position amid mounting external and internal challenges.

The proceeds from the Eurobond auction likely served as a vital financial cushion, helping to bolster the nation’s external reserves during a critical period.

The data from the Central Bank of Nigeria ,CBN, highlights a steady and consistent rise in the reserves over the one-month period. On December 2, the reserves stood at $40.292 billion, a figure that marked the baseline after the Eurobond auction. Over the next few weeks, the reserves grew incrementally, reaching $40.376 billion by December 9, reflecting an $84 million increase. This initial rise signified the immediate impact of the Eurobond proceeds entering the financial system.

The pace of growth accelerated in mid-December, with reserves climbing from $40.525 billion on December 12 to $40.790 billion by December 19. This $265 million increase within just seven days was indicative of intensified foreign exchange inflows, likely driven by oil revenues and strategic CBN interventions.

By the end of December, reserves had reached $40.884 billion, marking the highest point during the period. The stability observed in the last week of December reflects the government’s ability to manage inflows efficiently while addressing key fiscal challenges. As of January 3, 2025, the reserves remained steady at $40.884 billion.

When compared to the previous year, Nigeria’s FX reserves have grown significantly. On January 3, 2024, the reserves stood at $33.042 billion. By January 3, 2025, this figure had surged to $40.884 billion, representing a substantial year-on-year increase of $7.84 billion, or 23.74%. This growth highlights the success of the government’s efforts to secure external financing while leveraging improved global economic conditions to boost reserve levels.

The rise in FX reserves holds several positive implications for Nigeria’s economy. Firstly, it enhances the country’s ability to meet external payment obligations, including debt servicing and import financing.

With higher reserves, Nigeria is better positioned to manage exchange rate volatility and stabilize the naira, thereby boosting investor confidence and encouraging foreign direct investment.

Secondly, the increase in reserves provides a buffer against external shocks, such as fluctuations in global oil prices or changes in international financial conditions.

This is particularly important given Nigeria’s reliance on oil revenues, which makes its economy vulnerable to external economic disruptions.

Finally, the reserve growth improves Nigeria’s creditworthiness on the global stage. It sends a strong signal to international lenders and investors that the country is capable of meeting its financial commitments, which is critical for attracting further foreign investment and financing.

Nigeria raised $2.2 billion through its Eurobond auction in December last year, marking a pivotal moment in the country’s ongoing efforts to address its growing fiscal deficit.

This auction, which saw the issuance of two bonds with varying tenors, follows the government’s return to the international capital markets for the first time since March 2022.

The funds raised will primarily be used to support Nigeria’s 2024 budget, which is under strain due to persistent revenue shortfalls and mounting public spending.

While Nigeria recorded a total subscription of over $9 billion, only $2.2 billion was allotted.

The allotments are $700 million for the 6.5-year bond priced at 9.625% and a larger $1.5 billion for the 10-year bond priced at 10.375%.

While the growth in FX reserves is a welcome development, sustaining this trend poses significant challenges. Nigeria’s heavy reliance on external borrowings, such as Eurobonds, raises concerns about the long-term sustainability of its fiscal policies.

The rising debt profile, coupled with the high cost of servicing these debts, could strain government revenues and limit fiscal flexibility in the future.

To address these challenges, Nigeria must prioritize structural reforms aimed at diversifying its sources of foreign exchange. Reducing dependence on oil revenues is crucial for ensuring long-term economic stability.

Expanding non-oil exports and promoting foreign direct investment will be key strategies in this regard.

Also, fiscal discipline will be essential to ensure that funds raised from external borrowings are used efficiently. Investments in critical infrastructure and economic development projects will help boost productivity and create a more resilient economy.