Improving demand conditions helped to support further increases in
output and new orders in Nigeria’s private sector at the midway point of
the year. Rising workloads and the prospect of further growth in the
months ahead meant that firms took on additional staff and raised both
purchasing activity and inventory holdings. Input costs and output
prices increased sharply again, albeit to lesser extents than
immediately following the outbreak of war in the Middle East. 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: “Although the rate of growth slowed in June compared to
May, Nigeria’s private sector witnessed an increase in output at the
end of Q2:26 as higher demand and new product development supported an
increase in sales volume for companies. This rising demand led to higher
workload, thereby ensuring the private sector hired new staff across
three of the four sectors monitored by the survey besides agriculture.
Business confidence also rose to a 12-month high with firms citing the
ability to secure new stocks; business expansion plans; and advertising
efforts as key factors making them expect an expansion in output over
the next one year. Input prices still increased but not up to what was
witnessed during the onset of the United States/Israel – Iran war.
The effect of this was a passthrough impact on output prices amid rising
cost of raw materials and transportation. “The PMI print during the
quarter is consistent with a likely 3.94% y/y GDP growth rate in Q2:26,
higher than the 3.89% y/y growth seen in Q1:26. We retain our 2026
growth forecasts at 4.1% as we see the oil sector growing by 3.45% y/y
in 2026, from 8.50% y/y in 2025, while the non-oil sector is likely to
grow by 4.11% y/y, from 3.71% y/y in 2025. The risks to our outlook
include country-wide insecurity which may constrain food production,
exchange rate pressures resurfacing, extreme-weather related conditions
and higher fertilizer prices impacting crop yield, and a volatile global
environment which may affect sentiment and constrain capital flows.”
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The headline PMI posted 53.4 in June, down slightly from May’s reading
of 54.1, but still above the 50.0 no-change mark and signalling a solid
monthly improvement in business conditions at the end of the second
quarter. The health of the private sector has now strengthened in five
successive months. Panellists often reported improving customer demand
in June. This, alongside the introduction of new products, helped lead
to a further marked rise in sales volumes. With new orders up and
companies expanding their operations, output also increased. In both
cases, however, rates of growth were softer than seen in May. Business
activity expanded across three of the four broad sectors covered by the
survey, the exception being manufacturing.
Companies were also optimistic that output will rise over the coming
year, and sentiment improved markedly to the strongest since June 2025.
Advertising efforts, business expansion plans and stockpiling were among
the factors supporting confidence, according to respondents. Improving
customer demand and confidence in the year ahead outlook encouraged
companies to expand their staffing levels, purchasing activity and
inventories in June. Employment increased for the thirteenth consecutive
month. The rate of job creation was modest, but the most marked since
February.
The latest expansion in purchasing was marked and the same as that seen
in May, while stocks of inputs were up solidly. Despite increased
operating capacity, backlogs of work continued to rise amid customer
payment delays and power supply issues. Supply-chain delays were also
evident as vendor lead times lengthened for the first time in a year.
Longer delivery times were often attributed to poor road conditions.
Higher costs for fuel, raw materials and transportation resulted in a
further sharp rise in purchase prices during June, albeit the rate of
inflation eased to a four-month low. Staff costs, meanwhile, increased
at a sharper pace as companies helped their workers deal with rising
living costs. The pass-through of higher input costs to customers
resulted in a further marked rise in selling prices, and the pace of
inflation ticked up from May.
