Nigeria’s private sector witnessed a slight deceleration in growth in June 2025, with the Stanbic IBTC Bank Purchasing Managers’ Index (PMI) falling to 51.6 from 52.7 in May.
The latest figure marks the slowest expansion in seven months and continues a downward trend that began after the PMI peaked in March. Despite the loss of momentum, the business outlook has strengthened, with confidence among firms hitting its highest point since August 2022.
The June PMI reading, though above the neutral 50.0 threshold that separates expansion from contraction, highlights a cautious mood in Nigeria’s private sector as firms grapple with mixed signals in the economic environment. While demand remains solid and inflationary pressures have softened, challenges in manufacturing, logistics, and infrastructure continue to weigh on overall activity.
Manufacturing Weakness Pulls Down Output Growth
The most significant contributor to the slowdown in overall output came from a sharp drop in manufacturing activity, which contracted notably after showing signs of resilience earlier in the year. Although other sectors such as services and construction continued to grow, the pace of expansion in these areas also slowed in June.
Stanbic IBTC’s Head of Equity Research for West Africa, Muyiwa Oni, noted that “the pace of expansion has slowed for the third consecutive month after peaking in March,” reflecting increasing caution among Nigerian businesses. The June PMI score of 51.6 sits below the 2025 average of 53.1, confirming that the economy is still growing but at a reduced pace.
New Business and Orders Remain Positive but Easing
While output growth softened, new business continued to expand across sectors, albeit at a slower rate. This suggests demand remains present in the economy, though the intensity of that demand has moderated. Firms that reported higher activity pointed to customer acquisitions and successful marketing strategies, but also noted that lingering economic uncertainty has caused some clients to delay spending or scale down purchases.
Amid the cooling pace of activity, businesses are growing more optimistic about the months ahead. The report showed that the future output index—a measure of business expectations—jumped to 83.9 in June from 70.9 in May. This is the highest level of optimism recorded since August 2022.
Respondents linked their optimism to expectations of better access to financing, operational expansion, and improved consumer demand. Several firms said they were planning to ramp up investment and introduce new product lines or services in anticipation of better economic conditions.
Inflation Pressures Continue to Ease
Inflationary pressures, which had dominated economic headlines throughout 2024, showed further signs of easing. Although prices remain elevated by historical standards, June marked the second consecutive month of slower price increases.
Cost inflation for businesses, particularly in raw materials and logistics, has moderated due to more stable exchange rates and improvements in supply chains. While manufacturers still reported sharp rises in input and output prices compared to other sectors, the pace of increase was the slowest seen in over two years.
For consumers, this trend may offer some relief, especially after a year of skyrocketing prices that eroded purchasing power and triggered widespread public discontent. Firms across sectors said they were adjusting to the new cost landscape by streamlining operations and seeking cheaper suppliers to maintain margins without passing too much cost onto customers.
Employment Holds Steady, Purchasing Slows
Employment levels were largely stable in June, with companies maintaining their workforce after a slight reduction in May. Most businesses attributed the decision to stabilize hiring to a cautious outlook and a desire to manage costs while demand conditions remained uncertain.
Purchasing activity, however, mirrored the broader slowdown in output. Although businesses continued to acquire inputs and stockpile in anticipation of future growth, the pace of purchasing slowed significantly. Respondents cited concerns about subdued new orders and the need to manage inventory carefully in an environment where cash flow remains a concern.
Persistent Challenges: Backlogs, Logistics, and Supply Disruptions
Backlogs of work increased for the third month in a row in June, as companies struggled with uncompleted orders. Businesses reported that material shortages, erratic power supply, delayed customer payments, and inefficiencies in the transport network were major causes of delays in completing projects or delivering goods.
Some firms also flagged persistent logistical bottlenecks as a key impediment. Road infrastructure issues and supplier delivery delays were frequently mentioned, contributing to the slow pace of work clearance.
In contrast to earlier months where supplier delivery times had improved, June recorded no significant change in delivery efficiency. This marks a pause in the progress that had been seen since March 2023 in shortening lead times, with businesses noting that they were again grappling with unpredictability in input arrival schedules.
Outlook: Growth Still on Track but Fragile
While June’s PMI data indicates that Nigeria’s private sector is still in positive territory, the underlying fragility of that growth cannot be overlooked. A weakening manufacturing sector, persistent power issues, and uncertain demand could weigh heavily in the coming months if not addressed.
However, the marked jump in business confidence offers a promising counterbalance. If expectations of improved financing and macroeconomic stability materialize, businesses may accelerate hiring, investment, and output in the second half of 2025.
Analysts believe the economy’s ability to maintain positive momentum will hinge on how quickly structural issues—particularly around infrastructure, energy, and financing—can be resolved.
