Nigeria’s Inflation Slowdown Pushes Business Activity to Four-Year High
Nigeria’s private-sector business activity accelerated to its strongest level in more than four years in September, as stronger customer demand and new orders lifted output and encouraged companies to increase purchasing and hiring.
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI), compiled by S&P Global, rose for the second consecutive month to 56.4 in September, from 54.3 in August, signalling a marked improvement in private-sector operating conditions.
The latest reading was the strongest since February 2022, when the PMI stood at 57.3, as companies benefited from improving customer demand and the launch of new products.
Last month’s performance also marked a stronger end to the third quarter, with output, new orders and purchasing activity all increasing at their fastest rates in more than four and a half years.
“Overall business conditions improved significantly in September, with the headline PMI rising to a level not seen since February 2022, thereby ensuring a better third quarter for business activities relative to the second quarter,” said Muyiwa Oni, head of equity research, West Africa, at Stanbic IBTC Bank.
New business increased for the eighth consecutive month, with the pace of growth the strongest since February 2022. The increase was attributed to stronger customer demand and the introduction of new products.
Output growth was broad-based, with all four sectors covered by the survey recording marked expansions.
Companies responded to stronger workloads by increasing purchasing activity, with some businesses buying inputs in anticipation of further improvements in demand. This led to the sharpest accumulation of inventories since the end of 2021.
The stronger activity also supported employment, although job creation remained modest. Some firms relied on temporary workers to complete specific projects as they sought to keep pace with rising workloads.
Data from the National Bureau of Statistics shows that the annual inflation rate eased slightly to 15.39 percent in August from 15.43 percent in July, marking the lowest since March and the third straight month of slowdown. The relative strength of the naira provided support.
Cost pressures remain
The improvement in business activity came alongside renewed pressure on companies’ costs.
Input prices rose sharply in September, with respondents citing higher fuel costs, transport expenses, raw materials, food products and animal feed. Staff costs also increased as companies adjusted pay and offered incentives to workers completing projects.
Firms subsequently passed some of these higher costs on to customers, pushing output-price inflation to a three-month high. Selling prices increased at the fastest pace since June.
The persistence of cost pressures means stronger private-sector activity is not translating into uniformly lower operating costs, despite the broader improvement in Nigeria’s inflation environment.
Oni said higher fuel prices continued to feed into transport costs, while raw material and staff costs also contributed to the increase in input prices.
Stronger growth outlook
Businesses nevertheless became more optimistic about activity over the next 12 months, citing expansion plans, new branches, potential exports, additional customers and stockbuilding.
Oni said the strong end to the third quarter was consistent with an estimated 4.56 percent year-on-year GDP growth in the third quarter, taking Stanbic IBTC’s full-year 2026 growth estimate to about 4.4 percent, from 3.87 percent in 2025.
He expects the non-oil economy to perform better in 2026, with manufacturing benefiting from a low statistical base, while ICT, trade, real estate, and finance and insurance remain key drivers of services-sector growth.
