Business confidence jumps as output rises second month
Confidence in the business environment in Nigeria is on the rise, as reflected in increased output for the second consecutive month, the latest Purchasing Managers’ Index from Stanbic IBTC Bank Nigeria on Monday has indicated.
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. Readings above 50.0 signal an improvement in business conditions from the previous month, while readings below 50.0 show a deterioration.
The Stanbic IBTC Bank Nigeria PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail, and services. Data were first collected in January 2014.
According to the latest PMI report, the budding growth in the Nigerian private sector seen at the end of 2024 was sustained into the first month of 2025, with new orders and business activity each continuing to rise.
“Moreover, there was a large improvement in business confidence while firms expanded employment, purchasing, and inventories. Although input costs and output prices continued to rise rapidly, respective rates of inflation were much slower than seen in December. Business activity rose solidly in January, after having returned to growth in December. That said, the rate of expansion eased from the previous month. Activity increased across three of the four monitored sectors, the exception being wholesale and retail.
“Signs of improving customer demand and a greater willingness among clients to commit to new projects supported the rise in output and also contributed to the growth of new orders. As was the case with activity, new business increased for the second month running, but at a softer pace than in December. Companies were also much more optimistic regarding the future in January, with business expansion plans and marketing activities set to support output growth over the coming year. Although remaining relatively muted overall, the uplift in sentiment seen at the start of the year was the largest since the survey began just over 11 years ago,” part of the report read.
Commenting on the report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, 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.
“Elsewhere, input prices increased at a slower pace while the pace of increase in output prices is the slowest since July 2024. Headline inflation averaged 33.1 per cent y/y in 2024 from an average of 24.52 per cent y/y in 2023, mostly driven by significant FX depreciation; renewed petrol price increases in line with full petrol price liberalisation; structurally low food supplies exacerbated by high extreme weather conditions; and increased food demand, especially during the festive season.”
On inflation, Oni echoed similar sentiments of a moderation in the inflation rate in 2025, although he projects that the pace of the moderation is only likely to be faster in late Q3:25.
“Notably, we expect headline inflation to average 30.5 per cent year-on-year in 2025 and end the year at 27.1 per cent year-on-year. In 2025, we project the non-oil sector to grow by 3.2 per cent y/y from an estimated 3.0 per cent y/y in 2024.
Growth is likely to pick up across manufacturing and trade, while ICT and finance & insurance should continue to play a big role in economic performance. However, agriculture will likely still lag its long-term average amid lingering internal security challenges, high input costs, and extreme weather conditions. Within the manufacturing sector, cement, food, chemicals, and pharmaceutical products are key sub-sectors that have been exceeding the manufacturing sector’s growth since Q4:22,” he concluded.
Meanwhile, the PMI indicated signs of inflationary pressures softening in January. Although rates of increase in both input costs and output prices remained elevated, in both cases the rises were much weaker than seen in December. Overall, the input price inflation was the slowest since April 2024, while charges increased at the weakest pace in six months.
