- Nigeria’s Purchasing Managers’ Index saw 13 months of improvement as relatively stable exchange rate and lower fuel costs eased inflationary pressures
- The PMI report stated that selling price inflation slowed down in seven months
- Cost pressures persisted in February 2025 with a moderate inflation pace
The headline Purchasing Managers’ Index (PMI), which tracks private sector performance, recorded improvement in 13 months as it rose to 53.7 in February 2025, up from 52.0 in January 2024.
According to the latest Stanbic IBTC Bank Nigeria PMI, compiled by S&P Global, the February reading marked the highest level since January 2024 when it was 54.5 points
A PMI reading above 50.0 indicates an expansion in business activity, while a reading below 50.0 signals a contraction.
The report stated that 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.
In his comments, Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, noted that exchange rate stability and lower cost of fuel were instrumental to the easing of inflationary trend, which also strengthened consumer demands in February.
“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.
Selling price inflation slows down in 7 months
The report further noted that the selling price inflation in Nigeria’s private sector slowed to a seven-month low in February 2025.
The report, which assesses business conditions in the private sector, indicated 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 follows the expansion of business activity at its fastest pace in over a year, with new orders and purchasing activity rising sharply.
It noted 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.”
A sectoral analysis of the data showed that agriculture, manufacturing, services, and wholesale and retail recorded growth in output. However, the wholesale and retail sector marginally increased, an indication that some businesses in this segment were still experiencing slower recovery.
Cost pressures persisted with moderate inflation pace
According to the report, while input costs continued to rise, the pace of inflation moderated, easing to its slowest level in 10 months.
It noted that overall expenses were driven by higher raw material prices and a surge in staff costs, which rose at their sharpest rate since March 2024
These pressures notwithstanding, the rate of increase in selling prices was the slowest in seven months, an indication of a cautious pricing approach by businesses.
The report stated that about 39 per cent of firms increased their selling prices in February, while less than one per cent lowered their charges.
Employment levels saw marginal gains despite improved business climate
The PMI report stated that despite the improved business climate, employment levels recorded only marginal gains, constrained by high staff costs.
It 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.
On the other hand, 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.
Report projects positive economic growth outlook in 2025
The PMI report projects a positive economic growth in Nigeria in 2025, aligning with the projections of experts and global economic bodies.
Stanbic IBTC analysts expect further improvements in the year, particularly in the non-oil sector, supported by stronger foreign exchange stability and improved liquidity, lower borrowing costs, and stronger investment in real sector activities like manufacturing, trade, and real estate.
The analysts say the non-oil sector will grow by 3.4 per cent year-on-year in 2025, while overall Gross Domestic Product (GDP) growth is expected to reach 3.5 per cent year-on-year.
Recall that Nigeria’s real GDP grew by 3.84 per cent year-on-year in the fourth quarter (Q4) of 2024 from 3.46 per cent year-on-year in the third quarter (Q3) of 2024.
For the full year 2024, the GDP growth increased to 3.40 per cent, up from 2.74 per cent in 2023.
The biggest contributor to the GDP in 2024 was the services sector, accounting for 79 per cent of GDP growth. The agriculture sector contributed 11.9 per cent, while industries contributed nine per cent.
Business sentiment declined in February despite the optimism surrounding rising demand and easing inflationary pressures, as some firms expressed concerns about future cost increases.
However, many businesses are optimistic of expansion, with firms planning to open new production plants and explore export opportunities in the coming months.
Yuletide demands boost Nigeria’s manufacturing sector’s performance in December 2024
Meanwhile, TheRadar earlier reported that Nigeria’s manufacturing sector ended 2024 on a high note as the Purchasing Managers’ Index (PMI) rose to 52.70 points in December, driven by a surge in demand during the yuletide season.
According to the Stanbic IBTC Bank Nigeria PMI report for December 2024, the rise is a pointer to a moderate expansion in manufacturing activities, pointing to a promising outlook for the sector in the new year.
