Stanbic IBTC Bank
Picnews
Improving demand conditions continued to support growth in Nigeria’s private sector at the midpoint of the year, with firms recording a further increase in output and new orders in June. The rise in workloads, coupled with expectations of sustained expansion, also prompted businesses to boost staffing levels, increase purchasing activity, and build up inventories.
However, input costs and output prices rose sharply once again, though at a slower pace than in the immediate aftermath of geopolitical tensions in the Middle East. The Stanbic IBTC Purchasing Managers’ Index™ (PMI®), which measures business conditions in the private sector, remained above the 50.0 threshold—indicating continued expansion. Readings above 50.0 signal improvement, while those below reflect contraction.
The headline PMI stood at 53.4 in June, slightly lower than 54.1 in May, but still pointing to a solid improvement in business conditions. The private sector has now recorded five consecutive months of expansion.
Commenting on the report, Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank, noted that although growth moderated slightly, strong demand and new product introductions supported higher sales volumes across the private sector at the end of the second quarter.
He explained that increased demand led to higher workloads, prompting job creation across three of the four sectors surveyed, with agriculture being the exception. Business confidence also strengthened, reaching a 12-month high, driven by expectations of improved stock availability, expansion plans, and increased advertising efforts.
Oni added that while input prices continued to rise, the pace of inflation eased compared to earlier disruptions linked to global geopolitical tensions. The cost pressures, driven by raw materials and transportation, were partly passed on to customers through higher output prices.
He further projected that the PMI trends are consistent with a possible 3.94% year-on-year GDP growth in Q2 2026, slightly higher than the 3.89% recorded in Q1 2026. He maintained a 2026 growth forecast of 4.1%, supported by expected growth in both the oil and non-oil sectors, although he highlighted key risks including insecurity, exchange rate pressures, weather-related challenges affecting agriculture, rising fertilizer costs, and global market volatility.
Survey data showed that output growth was broad-based across three of the four major sectors, with manufacturing being the only exception. New orders rose strongly, supported by improved customer demand and the introduction of new products. As a result, companies expanded operations, although the pace of growth was slightly weaker than in May.
Employment increased for the thirteenth consecutive month, with firms reporting modest but sustained job creation driven by rising demand and positive business sentiment. Purchasing activity also remained strong, while inventories increased solidly across the sector.
Despite stronger capacity levels, backlogs of work continued to rise, driven by customer payment delays and ongoing power supply challenges. Supply chain pressures re-emerged, with vendor delivery times lengthening for the first time in a year, often linked to poor road conditions.
Cost pressures remained elevated, with higher fuel, raw material, and transportation costs contributing to a sharp rise in input prices, although inflation eased to a four-month low. Staff costs also increased as firms adjusted wages to help employees cope with rising living expenses.
Overall, the survey indicated continued resilience in Nigeria’s private sector, with firms passing higher costs on to customers, resulting in a further increase in selling prices, albeit at a slightly faster rate than in May.
