Nigeria’s private sector recorded its sixth consecutive month of expansion in July, even as the headline Purchasing Managers’ Index (PMI) dipped to a three-month low, according to the latest Stanbic IBTC Bank Nigeria PMI report.
The PMI registered 52.5 in July, down from 53.4 in June, but remained comfortably above the 50-point threshold that separates expansion from contraction. While the reading was the weakest in three months, it still signalled a solid improvement in business conditions.
New Orders Drive Growth
The report attributed the sustained expansion to stronger customer demand, competitive pricing, and new product launches, which helped businesses secure fresh orders and extend the current growth streak to six months.
“Higher demand also lifted business activity, although output growth moderated to its slowest pace since January,” the report noted.
Agriculture and manufacturing recorded stronger gains, while services and wholesale/retail posted more modest improvements. Firms also hired additional workers and increased purchases of production inputs to meet current demand and prepare for future workloads, leading to another rise in inventories.
Logistical Challenges
Some businesses, however, reported logistical challenges that delayed project completion, resulting in a slight increase in outstanding work—even as supplier delivery times improved.
Inflation Eases
A key feature of the July survey was the continued easing of inflationary pressures. Both input costs and selling prices rose more slowly than in June, with purchase cost inflation slowing sharply to its lowest level in five months.
“Inflationary pressures softened in July, with both input costs and output prices rising at weaker rates than in June. Purchase cost inflation slowed particularly sharply, easing to the lowest in five months,” the report stated.
Despite the moderation, businesses continued to contend with higher fuel and raw material costs, which kept purchase prices elevated. Staff costs also increased, although at the weakest pace since April.
Business Confidence
In line with easing input costs, companies raised their selling prices at the slowest pace since February, with agriculture recording the strongest increase and services the weakest.
Business confidence remained positive, although it slipped slightly from the one-year high recorded in June. Just under half of the firms surveyed expect output to increase over the next 12 months, supported by stronger marketing efforts and expansion plans, including the opening of new branches.
Analyst Commentary
Commenting on the report, Muyiwa Oni, Stanbic IBTC’s Head of Equity Research, West Africa, said stronger customer demand, improved pricing, and new product launches helped businesses attract more orders and sustain private sector growth, even though activity moderated from June.
“Nigerian businesses reported improved customer demand in July while better pricing and new product launches also helped them to capture new orders arising from the increase in demand. These factors helped to keep the private sector activity in an expansionary territory, although this moderated when compared to June,” he said.
Oni noted that businesses also increased purchases of production inputs to meet current demand and prepare for future workloads. Although higher fuel and raw material costs continued to push up input prices, he said input costs rose at their slowest pace in five months, while selling price inflation also softened.
Inflation Outlook
Oni added that the moderation in business costs mirrors the slight easing in Nigeria’s headline inflation, which slowed to 15.91 percent in June from 15.93 percent in May. He projected that annual inflation could ease further to about 15.72 percent in July, largely due to favourable base effects, although month-on-month inflation is expected to be higher than in June.
Growth Forecast
Oni retained the 2026 economic growth forecast at 4.1 percent, with the oil sector expected to expand by 3.45 percent and the non-oil economy by 4.11 percent.
Key Risks
He, however, warned that insecurity, renewed exchange rate pressures, adverse weather conditions, rising fertiliser prices, and global economic uncertainty remain key risks that could weigh on food production, investor sentiment, and capital inflows.
