Abayomi Susan
Nigeria’s private sector maintained strong growth momentum in May, with marked increases in output and new orders prompting firms to expand purchasing activity. However, job creation remained relatively subdued. On the cost side, rising fuel prices continued to exert pressure on input and output costs, although the rate of inflation moderated compared to April.
The Stanbic IBTC Purchasing Managers’ Index™ (PMI®) serves as a key indicator of business conditions, where readings above 50.0 indicate expansion and those below 50.0 signal contraction.
According to Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, private sector activity improved to its strongest level in nine months, with the headline PMI rising to 54.1 in May from 52.4 in April. This improvement was driven by faster growth in output (56.6 vs 53.4) and new orders (57.0 vs 54.6), reflecting stronger customer demand and the introduction of new products. While input costs continued to rise, the pace of inflation eased for a second consecutive month. Output prices also increased, with the most pronounced rises recorded in the manufacturing and agriculture sectors.
Data from the National Bureau of Statistics (NBS) showed that Nigeria’s economy expanded by 3.89% year-on-year in Q1 2026, slightly below the implied 3.99% estimate derived from Stanbic IBTC’s PMI. The variance was largely attributed to weaker-than-expected performance in the non-oil sector. The oil sector grew modestly by 2.57% (down from 6.79% in Q4 2025), while non-oil growth slowed to 3.94% from 3.99%. Key growth drivers included agriculture, manufacturing, construction, information and communication, trade, and finance and insurance, which together accounted for 82.4% of real GDP growth during the period.
Given the softer-than-expected Q1 performance, GDP growth for 2026 is now projected at 4.13% year-on-year, revised from an earlier forecast of 4.22%, while 2025 growth is estimated at 3.87%. Growth is expected to be supported by election-related activity, continued investment inflows, and increased infrastructure spending. Crude oil production is projected to average 1.7 million barrels per day in 2026, up from 1.64 million barrels in 2025, with output unlikely to reach the 2.0 million barrels per day benchmark before 2030.
The May PMI reading of 54.1 indicates a solid improvement in business conditions, marking the strongest performance since August 2025 and the fourth consecutive month of expansion. The growth was underpinned by accelerated increases in both output and new orders, which reached seven- and nine-month highs respectively, supported by improving demand and new product launches.
Expansion was recorded across all major sectors surveyed. Rising demand and optimistic expectations for future growth encouraged firms to increase purchasing activity and rebuild inventories. Supplier performance also improved, aided by prompt payments, better logistics coordination, and improved road conditions, which supported faster delivery times.
Employment continued to rise only marginally, although job creation has now been sustained for 12 consecutive months. Backlogs of work also increased for the fourth straight month, driven by delayed customer payments, material shortages, and power supply disruptions.
Input costs remained elevated due to higher fuel prices linked to geopolitical tensions, although inflation eased to a three-month low. Staff costs rose modestly, largely reflecting efforts to cushion employees against rising living and transport expenses.
Output prices increased sharply as firms passed on higher costs to customers, though inflation in selling prices also softened to its lowest level since February.
Business confidence for the year ahead remained positive, supported by expansion plans, increased advertising, branch growth, and new product development. However, overall sentiment declined to its lowest level in a year, reflecting lingering cost pressures and operational challenges.
