Nigeria’s manufacturing sector expanded more slowly in January 2026 as rising costs, weak demand, and structural challenges hit chemicals, pharmaceuticals, plastics, and rubber sub-sectors hardest.
The slowdown was revealed in the latest NESG–Stanbic IBTC Business Confidence Monitor (BCM), which showed that while overall business conditions remained in expansion territory, momentum weakened noticeably.
The Current Business Performance Index fell to 105.8 points in January from 112.0 points in December 2025, marking its lowest level in six months, though slightly above the 105.7 points recorded in January 2025.
The BCM report points to uneven sectoral performance, with non-manufacturing activities sustaining growth even as manufacturing and trade faced headwinds.
Rising operational costs, weak post-festive demand, and broader infrastructural constraints continued to dampen investor confidence across key sectors.
What the report is saying
The January BCM highlights a broad-based slowdown across the economy, with varying sectoral impacts.
- The Manufacturing sector eased to 115.8 points from 117.9 points in December 2025.
- Services declined to 102.1 points from 104.3 points, though both sectors remained in expansion territory.
- Agriculture slipped into contraction at 99.5 points, down sharply from 112.9 points, while Trade fell further into contraction at 92.7 points from 123.8 points in December.
Overall, the data indicate that post-festive moderation, cost pressures, and weak consumer demand are key drivers of the slowdown.
More Insights
Rising business costs emerged as a major constraint in January, compounding structural challenges.
- The cost of doing business surged to 90.5 points from 54.7 points in December, while input prices jumped to 96.9 points from 68.9 points.
- NESG attributed the surge to a combination of new tax reforms, fuel price adjustments, and lingering inflationary pressures.
- Other challenges include limited access to finance, unreliable power supply, rising commercial property costs, and poor infrastructure, all of which continue to discourage investment.
The convergence of these pressures has squeezed profit margins and disrupted output across several sectors.
The manufacturing slowdown was particularly acute in certain sub-sectors, reflecting broader vulnerabilities.
- Chemical and Pharmaceutical Products, and Plastic and Rubber Products recorded the steepest declines.
- Wood and Wood Products, and Non-Metallic Products slipped into contraction territory.
- Textile, Apparel and Footwear, Cement, Motor Vehicles and Assembly, and Other Manufacturing maintained growth or remained flat.
NESG highlighted limited financing, persistent power outages, raw material shortages, insecurity, poor infrastructure, and rising input costs as key constraints on manufacturing, raising production costs and limiting new investment.
In contrast, the Non-manufacturing sector strengthened in January, showing resilience despite wider economic challenges.
- The BCM Index rose to 115.3 points from 110.2 points in December 2025, a sharp rebound from contraction in January 2025.
- Oil and Gas Services and Crude Petroleum drove much of the growth, moving firmly into expansion territory.
- Growth in Construction and Natural Gas moderated compared to December but remained positive.
The data suggests that non-manufacturing activities could act as a stabilizing factor for the economy amid manufacturing headwinds.
Services and Trade face headwinds
Services and Trade sectors showed signs of strain during the month.
- Services slowed, with weaker conditions in Financial Institutions, Real Estate, and Telecoms and Information Services, though Professional, Scientific and Technical Services improved.
- Trade fell sharply into contraction at 92.7 points, ending a multi-month expansion streak, with wholesale trade particularly affected.
- NESG cited inventory drawdowns, cost pressures, and weak post-festive demand as key drivers of the downturn.
These trends underline the fragile recovery path of Nigeria’s economy, highlighting ongoing vulnerabilities in manufacturing and trade despite pockets of growth in non-manufacturing sectors.
What you should know
NESG reports Nigeria’s business environment extended its expansion streak to a twelfth consecutive month in December 2025.
The Future Business Expectation Index dipped to 132.6 points in December from 134.8 in November.
