Nigeria’s business activity falls to 7-month low amid reforms

Nigeria’s private sector growth drops in June, with business activity slowing to the lowest in seven months despite signs of easing inflation, the latest Purchasing Managers’ Index (PMI) report by Stanbic IBTC Bank shows.

According to the report, the headline PMI fell to 51.6 in June from 52.7 in May, marking the weakest expansion since the current growth streak began late last year.

While the reading remains above the 50.0 threshold, a sign of improving business conditions, the slower pace underscores the fragile nature of Nigeria’s economic recovery.

“Despite remaining in expansion territory, the decline signals a modest improvement in operating conditions, primarily driven by a notable slowdown in output, new orders, and purchasing activity,” the report said.

The latest data shows that inflationary pressures, while still elevated, have begun to soften. Nigeria’s headline inflation rate eased for a second consecutive month to 22.97 percent in May 2025, down from 23.71 percent in April, according to the National Bureau of Statistics (NBS).

On a monthly basis, inflation slowed to 1.53 percent from 1.86 percent the previous month, a sign that the government’s macroeconomic reforms may be starting to yield results.

Analysts attribute the moderation to reduced price pressures across critical sectors such as food, utilities, clothing, and healthcare. However, cost burdens remain high, with firms reporting sharp increases in purchase prices, although the pace of inflation has fallen to a 25-month low.

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“What companies charge customers rose at the slowest rate in over two years, suggesting that firms are becoming more cautious about passing on costs in a price-sensitive environment,” the report stated.

Business activity slows across sectors

Despite the easing inflation, business sentiment remained cautious, with growth in output, new business, and purchasing activity all decelerating in June. Manufacturing was the main drag, with the sector recording a contraction in production, while agriculture and services posted only modest gains.

“New business volumes rose at a slower rate, hitting a five-month low, as companies noted weaker demand from customers,” the report said. “Some firms did, however, report customer acquisition gains, but growth was more tempered than in earlier months.”

Employment levels remained broadly unchanged, following a marginal drop in May. While companies increased purchasing activity, the rate of expansion was the weakest seen in the current growth streak, leading to the lowest inventory build-up in seven months.

The report added that operational challenges persisted, with backlogs of work rising for the third straight month due to supply disruptions, delayed payments, and chronic power shortages, long-standing constraints that continue to weigh on productivity.

“Still, business confidence surged to its highest point since August 2022, with many firms expressing optimism about future growth, buoyed by plans to invest in infrastructure and scale operations,” the PMI report stated.