Nigeria's private sector expands as business cost pressures con...

Nigeria’s private sector maintained its growth momentum in July as stronger customer demand lifted new business for the sixth consecutive month, while purchase cost inflation eased to its lowest level in five months, signalling a further moderation in business cost pressures.

The latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) compiled by S&P Global showed the headline index slowed to 52.5 in July from 53.4 in June. Although the reading was the weakest in three months, it remained above the 50-point threshold separating expansion from contraction, indicating continued improvement in private sector business conditions.

The report attributed the expansion to stronger customer demand, competitive pricing and new product launches, which supported another solid increase in new orders across the economy.

Business activity also expanded for the sixth straight month, although output growth moderated to its slowest pace since January. Agriculture and manufacturing recorded the strongest gains, while services and wholesale and retail trade posted more moderate growth.

The sustained increase in demand encouraged firms to hire additional workers, extending the current employment growth trend, although the pace of recruitment eased to a three-month low.

Businesses also increased purchasing activity and inventory holdings to meet current production needs and prepare for future demand, while supplier delivery times improved following delays recorded in the previous month.

The survey showed inflationary pressures continued to moderate during the month, with purchase cost inflation slowing sharply to its lowest level since February.

Despite the improvement, companies continued to report rising costs for fuel and raw materials, although staff costs increased at the weakest pace since April.

Reflecting softer input cost inflation, firms raised selling prices at the slowest pace since February. Agriculture recorded the fastest increase in output prices, while the services sector posted the weakest price growth.

Business confidence remained positive despite easing slightly from June’s one-year high, with almost half of surveyed firms expecting higher output over the next 12 months, supported by marketing initiatives and expansion plans, including new branch openings.

Commenting on the survey, Stanbic IBTC’s Head of Equity Research, West Africa, Muyiwa Oni, said stronger customer demand, improved pricing and new product offerings continued to support business expansion despite the moderation in overall activity.

He noted that companies increased purchases of production inputs to meet current demand and prepare for future workloads, adding that input costs rose at their slowest pace in five months while selling price inflation also eased.

Oni said the moderation in business cost pressures mirrors Nigeria’s declining inflation trend, following the easing in headline inflation to 15.91 per cent in June from 15.93 per cent in May.

He projected that annual inflation could decline further to around 15.72 per cent in July, driven mainly by favourable base effects, although month-on-month inflation is expected to increase slightly.

The economist retained Stanbic IBTC’s 4.1 per cent economic growth forecast for 2026, with the oil sector projected to expand by 3.45 per cent and the non-oil economy by 4.11 per cent.

However, he warned that insecurity, renewed exchange rate pressures, adverse weather conditions, rising fertiliser costs and global economic uncertainty remain significant risks capable of slowing food production, weakening investor confidence and reducing capital inflows.