Nigeria’s private sector is showing signs of renewed strength, recording its fastest expansion in more than a year and a half, according to the Stanbic IBTC Bank Purchasing Managers’ Index (PMI).
The index rose to 54.2 in August, up from 54.0 in July, marking a 19-month high in new order growth and a four-month high in output.
The PMI, which has stayed above the 50.0 growth threshold for nine straight months, highlights continued improvement in business conditions despite lingering economic headwinds.
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Demand Rebound and Sector Trends
The August uptick reflects sharper increases in both output and new orders, fueled by stronger customer demand and a growing willingness among clients to commit to fresh projects.
According to the survey, activity expanded in three out of four monitored sectors—services, construction, and agriculture—while manufacturing lagged. Firms responded to the higher demand by increasing staff levels for the third consecutive month. However, the pace of job creation slowed compared to July.
Purchasing activity also moderated, but remained resilient as businesses stocked up in anticipation of future growth. Significantly, companies cleared backlogs for the first time in five months, pointing to rising operational efficiency.
Despite these gains, business confidence softened for the second consecutive month. Companies cited expansion plans such as opening new branches and boosting marketing as reasons to remain cautiously optimistic about future growth.
Inflation Pressures Lose Steam
One of the key highlights of the August report was the continued easing of inflationary pressures. Input costs climbed at their slowest pace since March 2023, while output price inflation fell for the fourth month in a row—its lowest level since April 2020.
Staff cost inflation also slowed to a three-month low. Where wages did increase, they were largely linked to incentives for quicker project delivery and cost-of-living adjustments.
Muyiwa Oni, Head of Equity Research for West Africa at Stanbic IBTC Bank, explained: “The continued moderation of input and output prices suggests that inflation is likely to remain soft in the near term. This may incentivize the Monetary Policy Committee (MPC) of the Central Bank of Nigeria to adopt a more accommodative stance by September.”
Stanbic IBTC projects that headline inflation will ease further in August, to between 21.45% and 21.63% year-on-year. A sharper drop is expected by November, with inflation potentially falling to between 17.19% and 17.92%. The bank anticipates up to 150 basis points in cumulative rate cuts in 2025—a potential boost for borrowing, investment, and overall private sector momentum.
Why This Matters: Backdrop of Nigeria’s Fragile Economy
The positive PMI figures arrive at a time when Nigeria’s economy has struggled under a prolonged period of high inflation, currency volatility, and rising costs of doing business. Since 2023, businesses have faced an unprecedented squeeze from fuel subsidy removal, sharp increases in electricity tariffs, and a weakened naira that made imports more expensive.
The private sector’s resilience, as captured in the PMI, is particularly noteworthy because it signals that firms are adapting to these shocks. Still, the uneven sectoral performance—with manufacturing failing to keep pace—shows that recovery is fragile and uneven.
Nigeria’s history with inflation also complicates the outlook. Periods of easing price pressures have often been followed by sudden reversals, triggered by fuel price adjustments, foreign exchange shortages, or spikes in food prices. Analysts warn that while Stanbic’s projections are optimistic, much will depend on policy consistency and whether the Central Bank aligns monetary easing with fiscal discipline from the government.
Nigeria’s PMI and Economic Turning Points
The Stanbic IBTC Bank Nigeria PMI, compiled by S&P Global, has become one of the most reliable barometers of the country’s economic health since its launch in January 2014. Covering agriculture, mining, manufacturing, construction, wholesale, retail, and services, the index is based on surveys of around 400 private sector companies.
Historically, Nigeria’s PMI has swung in response to major economic shocks. During the COVID-19 lockdowns, the index plunged below the 50 threshold, signaling contraction across industries. Similarly, in 2016, when Nigeria slipped into recession due to falling oil prices, PMI readings underscored the depth of the downturn.
The current nine-month streak of expansion, therefore, marks an important psychological shift. It suggests that, even amid foreign exchange volatility, insecurity challenges, and uneven government reforms, the private sector is showing adaptability and resilience.