Stronger demand conditions are giving private-sector businesses renewed momentum heading into the final quarter of 2026, with new orders driving the fastest expansion in more than four years despite rising input and labour costs.
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) rose to 56.4 in September from 54.3 in August, marking the second consecutive monthly increase and the strongest improvement in private-sector business conditions since February 2022.
Commercial activity rebounded strongly in September, with the index remaining above the 50-point mark and all four sectors covered by the survey posting gains in output and new business.
The recovery, however, is coming at a cost. Companies are buying more inputs, rebuilding inventories and expanding capacity to meet stronger demand, while higher fuel, food, raw-material and labour costs are pushing operating expenses higher.
The private sector therefore heads into the final quarter with stronger demand on its side but margins under pressure, making cost management critical to converting the pickup in sales into sustainable earnings.
Demand returns to the driver’s seat
The strongest signal from the September survey was the acceleration in new business.
New orders increased for the eighth consecutive month and at the fastest pace since February 2022, while output also expanded at its sharpest rate since that month.
Stanbic IBTC attributed the improvement to stronger customer demand and the introduction of new products, with growth spread across all four sectors covered by the survey.
Muyiwa Oni, head of Equity Research, West Africa, at Stanbic IBTC Bank, said the September performance represented a significant improvement in overall business conditions.
“Overall business conditions improved significantly in September, with the headline PMI rising to a level not seen since February 2022,” Oni said, adding that the development pointed to a stronger third quarter for business activity compared with the second quarter.
Businesses stock up for the next wave
That development is already visible in corporate purchasing behaviour.
With workloads rising, companies increased their purchases of inputs sharply during September, with some businesses buying ahead of anticipated improvements in demand.
The increased purchasing produced the largest accumulation of inventories since the end of 2021.
Supplier performance also improved for the third consecutive month, helped by faster payments to vendors.
The PMI report shows that the recovery in demand is not occurring in a low-cost environment.
Purchase prices rose again in September, reaching a three-month high. Stanbic IBTC attributed the increase to higher fuel costs, animal feed, food products and other raw materials.
Staff cost inflation accelerated, adding to rising operating expenses as businesses benefited from stronger customer demand.
Companies are now facing higher sales alongside higher costs of production and delivery. Their ability to pass those costs on to consumers will be important for manufacturers, retailers, agriculture-related businesses and service providers seeking to protect margins.
The expansion also generated additional employment, although hiring remained modest.
Companies added workers to accommodate higher workloads, but many of the new positions were temporary and linked to specific projects.
At the same time, increased capacity helped firms keep pace with rising workloads, resulting in a marginal reduction in backlogs for the second consecutive month.
Stronger orders are prompting companies to add capacity, but hiring remains measured as businesses weigh the cost of committing to permanent staff in an environment of elevated operating expenses.
That caution matters for the wider economy. A stronger private-sector cycle will have greater developmental impact if expanding businesses move beyond temporary project-based hiring to create stable, productive jobs capable of supporting household incomes and consumer demand.
Despite cost pressures, companies became more optimistic about the next 12 months.
Firms cited plans to expand their businesses, open new branches, begin exporting, secure additional customers and build inventories.
