Growth momentum strengthened in the Nigerian private sector during May.
Marked rises in output and new orders were recorded, with firms ramping
up their purchasing accordingly. Expansions in employment remained
muted, however. On the price front, higher fuel costs continued to cause
sharp increases in input costs and output prices, but rates of inflation
softened from April. The headline figure derived from the survey is the
Stanbic IBTC 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.
Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank
commented: “Private sector activity in Nigeria improved to its best
level in nine months, with the headline PMI rising to an impressive 54.1
points in May from 52.4 points in April. This impressive business
condition was primarily due to accelerated expansion in both output
(56.6 vs April: 53.4) and new orders (57.0 vs May: 54.6) as evidence
pointed to improving customer demand and the launch of new products.
Input prices maintained an uptrend, but the pace of increase eased for
the second consecutive month. This is also reflected in higher output
prices with the steepest increase seen in the manufacturing and
agriculture sectors.
According to the National Bureau of Statistics (NBS), the Nigerian
economy grew by 3.89% y/y in Q1:26, slightly below our estimate of 3.99%
y/y GDP growth rate for the quarter as implied by the Stanbic IBTC Bank
PMI, with the deviation stemming from lower-than-expected non-oil
sector’s growth performance. The oil sector grew by a modest 2.57% y/y
(vs Q4:25: 6.79% y/y) while the non-oil sector’s growth also slowed to
3.94% y/y from 3.99% y/y in Q4:25. The breakdown of the 19 different
sectors that make up the domestic economy shows the agriculture;
manufacturing; construction; information & communication; trade; and
finance & insurance as the biggest drivers of Nigeria’s GDP growth in
Q1:26. These sectors accounted for 82.4% of real GDP growth rate during
the quarter.
Given the lower-than-projected real GDP growth in Q1:26, the economy may
now well grow by 4.13% y/y in 2026 from our initial forecast of 4.22%
y/y, and 3.87% y/y in 2025. Electioneering activity; continuous
government investment attraction drive; and improved spending on
infrastructure should continue to keep the non-oil sector active during
the year. Meanwhile, we retain our expectation that crude oil production
will likely average 1.7m bpd in 2026 from 1.64m bpd recorded in 2025 and
we do not see production touching the 2.0m bpd psychological benchmark
until at least 2030.”
The headline PMI rose to 54.1 in May from 52.4 in April, signalling a
solid monthly improvement in business conditions and one that was the
most pronounced since August 2025. The health of the private sector has
now strengthened in four consecutive months. Central to the solid
improvement in business conditions were marked and accelerated
expansions in both output and new orders during May. Rates of growth hit
seven- and nine-month highs respectively. Anecdotal evidence pointed to
improving customer demand and the launch of new products.
Output growth was recorded across all four broad sectors covered by the
survey. Improving demand, and the prospect of further growth in the
months ahead, led companies to expand their purchasing activity and
inventories in May. Here too, rates of expansion quickened from April
and were sharp. Efforts to secure inputs were helped by an improvement
in vendor performance, as prompt payments, goods arrangements with
suppliers and better road conditions helped to speed up deliveries.
Employment continued to rise only slightly midway through the second
quarter, although sustained job creation has now been recorded in each
month for a year. Meanwhile, backlogs of work increased for the fourth
successive month amid customer payment delays, material shortages and
power failures.
Increasing fuel costs following the outbreak of war in the Middle East
continued to drive up purchase prices in May. Purchase costs rose
rapidly again, despite the rate of inflation easing to a three-month
low. Purchase prices increased at a much quicker pace than staff costs,
which rose modestly again in May. Where companies increased staff pay,
this was often to provide help with higher living costs, and those for
transportation in particular. In line with the picture for input costs,
output prices continued to rise sharply in May. Here too, however, the
rate of inflation eased to the lowest since February. Plans to increase
advertising and expand operations through the opening of new branches
and introduction of new products were behind optimism in the year-ahead
outlook for output. Sentiment dipped, however, and was the lowest for a
year.
