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The latest Purchasing Managers’ Index (PMI) report released by Stanbic IBTC Bank Nigeria has revealed that the country’s private sector recorded its third consecutive month of growth in February. The headline PMI rose to 53.7, up from 52 in January, marking the highest level since January 2024.
A PMI reading above 50 indicates an expansion in business activity, while a reading below 50 signals a contraction. According to the report, output increased for the third consecutive month, with the pace of expansion at its fastest in over a year.
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Businesses attributed the increase to stronger demand conditions, with new orders rising at the sharpest pace in over 12 months. “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),” said Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank.
Oni noted that exchange rate stability and lower fuel costs played a key role in easing inflationary pressures. “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.
The report also revealed that the rates of expansion in output, new orders, and purchasing activity quickened as demand picked up and inflationary pressures showed signs of moderating. However, companies were reluctant to hire, with employment increasing only marginally.
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The latest data suggested that a relatively stable exchange rate and lower fuel prices contributed to easing cost pressures, giving businesses the space to adjust prices downward. As a result, the rate of increase in selling prices was the slowest in seven months, reflecting a cautious pricing approach by businesses.
About 39 per cent of firms increased selling prices in February, while less than one per cent lowered their charges, indicating that businesses remain mindful of price-sensitive consumers. 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 build inventories in anticipation of future demand growth. Supplier delivery times improved, with goods arriving faster than in the previous months, the report said, attributing the improvement to prompt payments, which helped to ensure efficient supply chain management despite persistent cost pressures.
Despite the optimism, business sentiment still dipped in February, with some firms expressing concerns about the future cost outlook.
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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. However, the rate of increase in selling prices was the slowest in seven months, reflecting a cautious pricing approach by businesses.
The PMI report also showed that agriculture, manufacturing, services, wholesale, and retail recorded growth in output. However, wholesale and retail sectors saw only marginal gains, indicating that some businesses in this segment were still experiencing slower recovery.
Commenting on the report, Oni said that the growth in output and new orders was a positive sign for the economy. “The improvement in business activity and demand conditions is a welcome development, and we expect this trend to continue in the coming months,” he said.
However, Oni also noted that the persistent cost pressures and concerns about future cost outlook could impact business sentiment and investment decisions. “While the growth in output and new orders is a positive sign, businesses need to be cautious about the potential risks and challenges ahead,” he said.
Overall, the PMI report suggests that Nigeria’s private sector is showing signs of recovery, driven by stronger demand conditions and easing inflationary pressures. However, businesses need to remain cautious about the potential risks and challenges ahead, including persistent cost pressures and concerns about future cost outlook.
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