Although the Nigerian private sector remained in growth territory midway through the second quarter of the year, there were signs of a slowdown in the latest survey period as inflationary pressures remained elevated. Rates of expansion in output and new orders eased in May, while employment dipped for the first time in six months.

 

 

The headline figure derived from the survey is the Stanbic IBTC Bank Purchasing Managers’ Index (PMI) Readings above 50.0 signal, an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. The headline PMI registered 52.7 in May, remaining above the 50.0 no change mark for the sixth successive month, and signaling a solid strengthening of business conditions over the month. The latest reading was down from 54.2 in April and pointed to the least marked improvement in the health of the private sector since January.

 

 

Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, commented: “Business conditions remain in the expansionary territory for the sixth consecutive month in May amid continued improvement in customer demand which is also ensuring businesses launch new products. However, the pace of improvement in business conditions slowed relative to April, pointing to the least marked improvement since January”.

 

 

While new orders have now increased in each month since November 2024, some firms implied that market conditions are softening. Hence, the pace of improvement in new orders during May eased to the weakest level in four months. Nonetheless, rising sales and higher customer numbers supported a pronounced output growth across the wholesale & retail and manufacturing sectors.

 

 

Given the rising sales and higher customer numbers, companies increased their quantity of purchases for the sixth consecutive month while the rate of inventory accumulation quickened to a three-month high.

 

 

However, input costs remain high in May, albeit slightly softer than April inflation, with the pace of price increase remaining well above the series average. As a result, output prices remained sharp as companies passed on the rising purchase costs to customers. Where companies charged lower prices, they indicated that it was due to the need to attract customers. This partly supported the easing of the low in May. the pace of output price inflation to a two-year low in May.

 

 

Nigeria’s business condition is on course to end Q2:25 on a positive momentum, albeit relatively weaker than witnessed in Q1:25. This, the report attributed to  currency weakness, higher raw material costs, and increased transport prices, which it says have been more pronounced than seen in Q1:25.

 

 

“However, as inflation is expected to remain softer compared to the 2024 average, interest rates are likely to be lower this year, thereby helping to support the medium-term economic growth path. Therefore, we still maintain our expectation that the Nigerian economy is likely to grow by 3.5% y/y in real terms in 2025 relative to 3.4% y/y growth in 2024,” Oni stated.