Onome Amuge
Business activity in Nigeria maintained a positive trajectory in January 2025, attributed to increased customer demand and an improved willingness among clients to embark on new projects, driving a corresponding rise in output, according to the latest Purchasing Managers’ Index (PMI) report.
The monthly PMI survey conducted by Stanbic IBTC Bank indicated that the headline index, which serves as a comprehensive gauge of the state of the Nigerian economy, stood at 52.0 in January, a marginal decline from 52.7 in December. Yet, the reading indicates an improvement from November 2024, where the index stood at 49.60. Readings above 50.0 suggest a positive shift in business conditions, while those below indicate a contraction.
“The nascent 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,” the report stated.
According to the report, though input costs and output prices continued to rise rapidly, respective rates of inflation were much slower than seen in December.
Buoyed by growing customer demand and a growing willingness among clients to embark on new projects, the output and new orders in Nigeria’s private sector witnessed an uptick in January. This encouraging trend was echoed by an increase in new business for the second month in a row, albeit at a softer pace than the previous month (December), according to the PMI report.
The report also showed an increase in the optimism of Nigerian companies towards their future prospects, as January saw a sharp rise in the number of businesses considering expansion plans and marketing initiatives.
The positive shift in sentiment among companies was underpinned by their renewed confidence in the potential for future growth, leading to the adoption of strategies that aim to support increased output over the coming year.
The PMI survey found evidence that inflationary pressures in Nigeria were beginning to ease in January, as both input cost increases and output price hikes slowed down significantly from their December levels. This development marked a notable deceleration in inflationary pressures, with overall input price inflation reaching its lowest point since April 2024, and output price increases posting their weakest growth rate in six months.
The report stated further: “Efforts to satisfy customer requirements in a timely manner led companies to expand their staffing levels, purchasing activity and inventory holdings at the start of the year. In each case, the rises were the second in as many months. In particular, the accumulation of stocks of purchases was the most pronounced in just over a year-and-a-half.
“The attempts to get through projects quickly meant that firms were more successful in depleting backlogs of work, which decreased at a solid pace that was the most pronounced since June 2022.
Finally, suppliers’ delivery times continued to shorten amid good arrangements with vendors and prompt payments.
During the reviewed period, Nigerian companies were more successful in reducing their backlogs of work, with the rate of backlog depletion reaching its fastest pace since June 2022.
The sharp decline in backlogs of work, observed consistently over eight consecutive months, saw many firms reporting that they had managed to clear all outstanding business within January.
Commenting on the report, Muyiwa Oni, head of equity research, West Africa at Stanbic IBTC Bank, remarked “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 33.18% y/y in 2024 from an average of 24.52% y/y in 2023 mostly driven by significant FX depreciation; renewed petrol price increases in line with full petrol price liberalization; structurally low food supplies exacerbated by high extreme weather conditions; and increased food demand, especially during the festive season. We expect a moderation in the inflation rate in 2025 although the pace of the moderation is only likely to be faster in late Q3:25. Notably, we expect headline inflation to average 30.5% y/y in 2025 and end the year at 27.1% y/y.”
Concerning expectations for 2025, Oni projected the non-oil sector to grow by 3.2 percent year over year from an estimated 3.0 percent year-on-year in 2024. According to him, 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.
On the other hand, he noted that agriculture will likely still lag its long-term average amid lingering internal security challenges, high input costs, and extreme weather conditions. Meanwhile, within the manufacturing sector, cement, food and chemicals & pharmaceutical products are considered key sub-sectors that have been exceeding the manufacturing sector’s growth since the fourth quarter of 2022.
