Despite signs of improved business activity, Nigeria’s private sector growth slowed to its lowest level in four months, according to the latest Purchasing Managers’ Index (PMI) released by S&P Global on behalf of Stanbic IBTC.
The report showed that while the private sector remained in expansion territory in May, inflationary pressures continued to weigh on the pace of growth. Both output and new orders expanded at their slowest rates since January, and employment contracted for the first time in six months.
The headline PMI stood at 52.7 in May — still above the 50.0 mark that signals no change — marking six consecutive months of business growth. However, this reading fell from 54.2 in April, indicating the mildest improvement in private sector health since the start of the year.
Output growth was broad-based across all four sectors surveyed, with wholesale & retail and manufacturing leading the gains. Panelists attributed expansions to stronger customer demand, higher client numbers, and new product launches.
Inflation remained elevated, albeit slightly easing from April. Rising raw material prices, a weaker currency, and increased transport costs drove rapid increases in purchase costs. Staff costs rose at the slowest pace since March 2023, partly due to a reduction in workforce numbers as some companies faced challenges in paying employees, resulting in resignations.
This dip in employment contributed to a second consecutive month of rising backlogs of work, which respondents linked mainly to delayed payments from customers. The increase in outstanding business was the sharpest since February 2023.
Meanwhile, companies continued to boost purchasing activity to meet current and future client demand, causing stocks of purchases to grow at the fastest rate in three months. Supplier delivery times shortened further, supported by competitive supplier markets and prompt payments, though this was the least significant improvement recorded in 2025 so far.
Business confidence declined for the fourth straight month, hitting one of its lowest levels on record. Despite this, companies remained optimistic about output growth over the next year, driven by plans for business expansion, marketing efforts, and inventory restocking.
Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, commented:
“Business conditions are still expanding, supported by improving customer demand and new product launches. However, the pace of improvement slowed compared to April, reflecting softer market conditions. While new orders have grown every month since November 2024, the rate of increase in May was the weakest in four months.”
Oni added that rising sales and customer numbers underpinned strong output growth in wholesale & retail and manufacturing. Companies increased their purchase volumes for the sixth consecutive month, and inventory accumulation accelerated to a three-month high.
Despite slightly softer inflation compared to April, input costs remain well above the average. Consequently, many firms passed higher costs to customers, although some lowered prices to attract buyers, which contributed to a two-year low in output price inflation.
Oni concluded:
“Nigeria’s business environment is set to close Q2 2025 on a positive, though relatively weaker note compared to Q1. Currency weakness, rising raw material and transport costs have become more pronounced. Nevertheless, with inflation expected to stay softer than in 2024, interest rates are likely to remain lower this year, supporting medium-term economic growth. We maintain our forecast of 3.5% real GDP growth for Nigeria in 2025, slightly up from 3.4% in 2024.”
