Business activity in Nigeria expanded at its weakest pace in seven months in June, as manufacturers struggled and overall demand softened despite relief from high inflation.
The latest Purchasing Managers’ Index (PMI) from Stanbic IBTC Bank fell to 51.6 from 52.7 in May, the weakest reading so far this year. While the figure remains above the neutral 50 mark, which separates growth from contraction, it points to a further loss of momentum in the economy.
“The rate of output growth eased particularly sharply, slowing for the second month running to a seven-month low,” Stanbic IBTC said in its report.
The PMI, a closely watched gauge of business conditions, is based on surveys of 400 companies across agriculture, manufacturing, services, construction, and retail. It combines indicators including new orders, output, employment, supplier delivery times, and inventory levels.
The PMI is an economic pulse as it offers an early signal of economic trends before official data such as gross domestic product (GDP) figure is released. A sustained slowdown could challenge Nigeria’s fragile recovery, even as inflationary pressures ease.
The National Bureau of Statistics has yet to release the GDP data for the first quarter of 2025. The GDP is a key tool for measuring economic performance as it assesses the value of goods and services produced within a country over a specific period.
Manufacturing Drag
The June slowdown was mainly driven by a contraction in manufacturing, even as other sectors like services, construction, and retail continued to expand. New business volumes rose at the weakest pace in five months, with firms citing softer demand from customers.
Purchasing activity increased, but at the slowest rate since the current growth phase began. Inventory levels saw their smallest build-up in seven months. Employment was largely flat, after a slight decline in May.
Firms continued to face operational hurdles. Backlogs of work rose for the third straight month, reflecting supply disruptions, delayed payments, and persistent power shortages that have long weighed on productivity.
While businesses grappled with sluggish activity, inflation pressures eased. Input price inflation fell to a 25-month low in June, helped by a steadier naira-dollar exchange rate and lower fuel costs since December.
According to official data, Nigeria’s headline inflation slowed for a second consecutive month in May, coming in at 22.97%, down from 23.71% in April.
Despite the slower activity, sentiment improved. The index tracking firms’ expectations for future output rose to 83.9 in June from 70.9 in May, the highest level since August 2022.
“Survey participants linked this renewed optimism to expectations that sufficient funding would be available to support business expansion and operational improvements,” said Muyiwa Oni, head of equity research for West Africa at Stanbic IBTC Bank.
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