Nigeria’s business confidence surged to a 4-month high in March, driven by the easing of inflationary pressures, according to the latest Purchasing Managers’ Index (PMI) report by Stanbic IBTC Bank. The headline PMI index rose to 54.3 in March, up from 53.7 in February, marking the highest level since January 2024.
PMI Above 50.0 Signals Expansion
A PMI above 50.0 indicates expansion in business activity, and with the latest reading at 54.3, Nigeria’s business sector saw solid growth. This marks the fourth consecutive month of improving conditions in the private sector, underpinned by strong domestic demand and a notable increase in new orders, which grew at the fastest pace in 14 months.
Key Drivers of Growth
The report highlighted several factors contributing to the uptick in business activity:
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Increased demand for goods and services, particularly in sectors such as manufacturing, trade, and real estate.
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Employment levels rose modestly, with the most significant increase in seven months. While some firms relied on contract-based hiring, overall employment sentiment remained positive.
Declining Inflationary Pressures
A major contributor to the improved business conditions was the decline in input cost inflation, which reached its slowest pace since May 2023. The Nigerian Bureau of Statistics reported that headline inflation eased to 23.18% in February, down from 24.48% in January.
Core inflation, which excludes volatile agricultural and energy prices, also saw a decrease, dropping to 23.01% from 25.13% the previous month.
Impact on Business Sentiment
With easing inflationary pressures, firms were able to stockpile inputs, anticipating more stable cost conditions in the coming months. As a result, the pace of price increases for goods and services slowed for the third consecutive month.
This improvement in price stability has fostered greater confidence within the private sector, further supporting economic recovery and growth.
Outlook for Nigeria’s Business Environment
The report emphasized that softening inflation and improved domestic demand conditions are expected to continue boosting the private sector. As business activity strengthens for the fourth straight month, the overall sentiment remains positive, suggesting a resilient and expanding economy in the months ahead.
In conclusion, Nigeria’s business confidence has significantly improved, with the easing of inflation providing a foundation for sustained growth in various sectors, and the PMI index reflecting a positive trajectory for the economy.
