Selling price inflation in Nigeria’s private sector slowed to a seven-month low in February, according to the latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI), compiled by S&P Global.
The report, which assesses business conditions in the private sector, indicates that while inflationary pressures remained elevated, the pace of price increases eased further, providing some relief to businesses and consumers.
The decline in selling price inflation comes as business activity expanded at its fastest pace in over a year, with new orders and purchasing activity rising sharply. The latest data suggests that a relatively stable exchange rate and lower fuel prices contributed to easing cost pressures, allowing businesses to adjust their pricing strategies.
The report read, “In line with the picture for input costs, the pace of output price inflation remained sharp in February, but eased to a seven-month low.”
PMI hits 13-month high amid stronger demand
The headline PMI—which tracks private sector performance—rose to 53.7 in February, up from 52.0 in January, marking the highest level since January 2024. A PMI reading above 50.0 indicates an expansion in business activity, while a reading below 50.0 signals a contraction.
According to the report, output increased for the third consecutive month, with the pace of expansion the fastest in just over a year. Businesses attributed the increase to stronger demand conditions, as new orders rose at the sharpest pace in over 12 months.
Sectoral data showed that agriculture, manufacturing, services, and wholesale & retail all recorded growth in output. However, the wholesale & retail sector saw only marginal gains, indicating that some businesses in this segment were still experiencing slower recovery.
Persisting cost pressures
While input costs continued to rise, the pace of inflation moderated, easing to its slowest level in ten months. The report noted that higher raw material prices and a surge in staff costs—which rose at their sharpest rate since March 2024—continued to drive overall expenses.
Despite these pressures, the rate of increase in selling prices was the slowest in seven months, reflecting a cautious pricing approach by businesses. About 39% of firms increased their selling prices in February, while less than 1% lowered their charges, indicating that businesses remain mindful of price-sensitive consumers.
Commenting on the findings, Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, noted that exchange rate stability and lower fuel costs played a key role in the easing inflationary trend.
“Activity in Nigeria’s private sector improved for the third consecutive month with the latest PMI reading of 53.7 points in February at its highest level since January 2024 (54.5 points).
“A relatively stable exchange rate and moderation in fuel prices are supporting the ease in inflationary pressures, which in turn helped strengthen consumer demand in the month. Thus, new orders increased for the fourth consecutive month, with survey participants noting a greater desire on the part of customers to commit to new projects,” he said.
Despite the improved business climate, employment levels recorded only marginal gains, as high staff costs acted as a constraint on hiring. The report noted that job creation slowed to its weakest pace in three months, even as firms sought to expand operations and increase output.
Instead of hiring more workers, businesses boosted purchasing activity, leading to the fastest increase in input buying since May 2023. Stocks of raw materials also rose at a faster pace as firms sought to secure inventories in anticipation of future demand growth.
Meanwhile, supplier delivery times improved, with goods arriving faster than in the previous months. This was attributed to prompt payments to suppliers, which helped ensure efficient supply chain management despite persistent cost pressures.
Economic growth outlook remains positive
The PMI report aligns with broader trends in Nigeria’s economic performance, with data showing faster GDP growth in Q4 2024. Nigeria’s real GDP expanded by 3.84% year-on-year in the last quarter of 2024 compared to 3.46% year-on-year in Q3 2024.
- For the full year 2024, the DP growth stood at 3.40%, up from 2.74% in 2023. The services sector remained the biggest contributor, accounting for 79% of GDP growth, while agriculture and industries contributed 11.9% and 9%, respectively.
- Looking ahead, Stanbic IBTC analysts expect further improvements in 2025, particularly in the non-oil sector, supported by stronger FX stability and improved liquidity, lower borrowing costs, and stronger investment in real sector activities like manufacturing, trade, and real estate
- With these factors in play, the non-oil sector is projected to grow by 3.4% year-on-year in 2025, while overall GDP growth is expected to reach 3.5% year-on-year.
- Despite the optimism surrounding rising demand and easing inflationary pressures, business sentiment dipped slightly in February, with some firms expressing concerns about future cost increases.
However, many businesses remain bullish on expansion, with firms planning to open new production plants and explore export opportunities in the coming months.
