Nigeria’s private sector is experiencing a resurgence, marked by a 13-month high in the Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) of 53.7 in February 2025. This signifies the most substantial improvement in business conditions since January 2024 and represents the third consecutive month of growth. The PMI’s consistent rise above the 50-point threshold, which separates expansion from contraction, paints a picture of a steadily strengthening private sector. This positive trend is propelled by a confluence of factors, including increased output across diverse sectors, rising new orders fueled by improving demand, and a moderation in inflationary pressures. The combination of these elements has created a more conducive environment for businesses to thrive and expand their operations.
A key driver of this positive momentum is the marked increase in output observed in February, the fastest since January 2024. This surge in output is attributed to higher sales driven by an improving demand environment. Furthermore, new orders and purchasing activity have also accelerated, further reflecting the growing demand. The positive impact of these trends is evident across various sectors, including agriculture, manufacturing, services, and wholesale and retail. The broad-based nature of this growth suggests a robust and resilient economic recovery. This improvement is also linked to a relatively stable exchange rate and moderating fuel prices, which have contributed to easing inflationary pressures and bolstering consumer demand.
The easing of inflationary pressures, while still present, is another positive development. Input cost inflation, although still elevated, slowed to its weakest pace in ten months. This moderation in cost pressures is crucial as it provides businesses with greater operational flexibility and reduces the pressure to pass on increased costs to consumers. While higher prices for raw materials and increased staff costs remain a concern, the slower pace of inflation offers a glimmer of hope for sustained economic growth. The easing of input cost inflation is attributed to a combination of factors, including improved supply chain dynamics and a more stable exchange rate.
Despite the positive overall picture, certain challenges persist. Employment growth, while present, remained marginal and at its slowest pace in three months. This subdued employment growth, despite the significant expansion in output and new orders, highlights the cautious approach adopted by businesses amidst lingering economic uncertainties. Although backlogs of work decreased, the relatively slow pace of job creation underscores the need for policies that encourage further private sector investment and job creation. The report suggests that cost pressures are a contributing factor to the limited job growth, indicating that businesses are still grappling with balancing cost management and expansion plans.
Looking ahead, businesses in Nigeria maintain a generally optimistic outlook for the future, although sentiment has slightly dipped compared to January and remains weaker than the historical average. The optimism is largely predicated on business expansion plans, including the opening of new branches and expansion of export operations. The fact that over half of the surveyed businesses predict a rise in output over the next 12 months reflects a degree of confidence in the future trajectory of the economy. This positive outlook is crucial for sustained investment and growth.
In the broader economic context, Nigeria’s real GDP growth saw improvement in Q4 2024, reaching 3.84% year-on-year, the highest since Q4 2021. This growth, fueled by both oil and non-oil sectors, brings the full-year 2024 growth to 3.40%, up from 2.74% in 2023. The services sector continues to be a dominant contributor to GDP growth, followed by agriculture and industries. Projections for 2025 remain positive, with anticipated further improvement in the non-oil sector due to FX stability, improved FX liquidity, and an expected reduction in borrowing costs. These factors are expected to support growth across various sectors, including manufacturing, trade, and real estate. Overall, the Nigerian economy is projected to grow by 3.5% in 2025, indicating a continued path of recovery and expansion.
