Business activity in Nigeria’s private sector surged to its highest level in 15 months this April, according to the latest Purchasing Managers’ Index (PMI) from Stanbic IBTC, compiled by S&P Global. The data reflects a positive shift in economic momentum as firms benefited from stronger consumer demand and improved output.
The PMI stood at 54.2 in April, nearly matching March’s 54.3, indicating continued robust growth. A reading above 50 signals expansion, while anything below suggests contraction.
Output and Employment on the Rise
April marked a notable increase in output across all major sectors of the economy, with the services industry leading the charge. Businesses reported a spike in new orders, which they attributed to an uptick in customer demand and a broader improvement in market conditions.
As a result, companies increased hiring for the fifth straight month. Although the job growth was modest, it was the fastest pace recorded since August of the previous year, signaling a steady buildup in employment to handle rising workloads.
Procurement Activity Accelerates
To manage the growing demand, firms boosted their purchasing efforts, recording the most rapid expansion in procurement since February 2022. Inventory levels also rose modestly—marking the first such increase in nearly a year—as businesses stocked up to meet incoming orders.
Despite efforts to improve efficiency, a rise in backlogs was reported. Some firms cited supply chain challenges, including costly materials and power disruptions, as contributing factors to delays.
Inflationary Pressures Resurface
Although inflation remains softer than the highs seen in 2024, cost pressures intensified in April. Rising prices for raw materials and a weakening naira led to higher input costs. Wages also climbed at a solid rate, adding to overall expenses.
This rise in operating costs translated to higher prices for final goods and services. Nonetheless, the rate of output price inflation was among the lowest recorded in the past two years, indicating that firms were still cautious about passing costs on to consumers.
Optimism Persists, Though Confidence Slips
Businesses remain largely optimistic about future output, but sentiment dipped for the third consecutive month. Most companies linked their confidence to expansion plans and investments, though lingering concerns over economic uncertainties, especially currency depreciation, tempered expectations.
Muyiwa Oni, Head of Equity Research for West Africa at Stanbic IBTC Bank, commented on the findings, saying, “The private sector maintained its growth momentum into the second quarter, driven by healthier demand and a moderation in inflationary pressures.”
He noted that all four tracked industries reported improved activity, with services performing particularly well. While cost pressures did increase, especially in manufacturing, they were more subdued than the spikes experienced last year.
Outlook for the Economy
Oni also provided insights into future trends, warning that the naira may weaken further in the second quarter due to ongoing global uncertainties. This could push inflation slightly higher than in Q1:25, though still below the average levels seen in 2024.
However, he projected that interest rates would likely ease in response to moderated inflation, potentially boosting economic growth in the coming months.
“We expect the economy to grow by 3.5% in real terms this year, slightly up from 3.4% growth recorded in 2024,” Oni added.
As April’s performance suggests, Nigeria’s private sector is beginning the second quarter on solid footing, with businesses cautiously optimistic about the road ahead.
