Nigerian businesses are maintaining strong confidence in the economy, despite a slight moderation in growth, as the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) settled at 52.0 in January.
While lower than December’s 52.7, the index remained above the crucial 50.0 mark, signaling continued expansion in the private sector.
The latest PMI data shows that business activity and new orders grew for the second consecutive month, buoyed by improving customer demand and greater willingness to commit to new projects.
More significantly, business confidence soared to its highest level in over a decade, reflecting optimism about expansion plans and improved market conditions.
The PMI report read, “Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
“The headline PMI posted 52.0 in January, down from 52.7 in December but still above the 50.0 no-change mark and therefore signalling a second successive monthly improvement in the health of the Nigerian private sector.”
Key indicators
- Business activity continued its upward trajectory, with firms expanding operations in response to rising demand.
- New orders increased, although at a slower pace than in December.
- Employment levels improved, as companies hired more workers for the second straight month.
- Inflationary pressures eased, with input costs and output prices rising at a much slower rate than in December.
- Stockpiling of inventories hit an 18-month high, as businesses sought to maintain supply chain stability.
Sectoral trends and economic outlook
The report highlighted that three out of the four monitored sectors experienced growth, with wholesale and retail being the exception. Companies also reported faster supplier delivery times, thanks to improved vendor arrangements and quicker payment cycles.
While inflation remains a concern, January recorded the slowest rise in input prices since April 2024, with output charges increasing at the weakest pace in six months. Stanbic IBTC analysts project headline inflation to moderate further in 2025, with an expected average of 30.5% for the year, down from 33.18% in 2024.
Growth in Nigeria’s non-oil sector is projected at 3.2% year-on-year in 2025, up from 3.0% in 2024. Key drivers include manufacturing, trade, ICT, and financial services, while agriculture is expected to remain subdued due to security challenges and high input costs.
Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, emphasized that while growth has slightly slowed, business sentiment remains strong.
He said, “Nigeria’s private sector activity sustained its improvement in January 2025, albeit lower than levels seen in December 2024. We note an increase in both output (53.7 vs December 2024: 54.8) and new orders (52.6 vs December 2024: 53.2) although slightly weaker than that seen at the end of 2024, on account of improving customer demand and more willingness to commit to new projects. Given the rising new orders, companies took on additional workers in January – representing the second month running in which this has been the case.”
What this means for businesses
- The latest PMI reading of 52.0 reinforces a growing sense of resilience and optimism within Nigeria’s private sector, despite ongoing economic challenges. Businesses are showing strong confidence in the economy, reflected in steady expansion, increased hiring, and higher stockpiling of inventories. The easing of inflationary pressures, particularly the slower rise in input costs, provides a positive signal for companies looking to manage operational expenses and sustain profitability.
- For businesses, the sustained growth in new orders suggests that consumer and corporate demand is stabilizing, allowing firms to plan long-term investments and expansion strategies with greater confidence. The fact that employment levels have now risen for two consecutive months indicates that businesses are not only seeing increased demand but also actively positioning themselves for future growth opportunities.
- Moreover, the moderation in inflation could lead to more predictable cost structures, allowing businesses to price their goods and services competitively without the need for aggressive price hikes. This is particularly important for manufacturers, traders, and service providers who rely on stable supply chains and predictable input costs.
- Overall, businesses that are agile and responsive to market trends stand to benefit from the improving environment. While challenges remain, particularly in sectors like agriculture, firms that invest in efficiency, innovation, and customer engagement are well-positioned to thrive in 2025.
