BUSINESS activity in Nigeria’s private sector slowed in May, even though inflation showed signs of easing, according to data from the National Bureau of Statistics (NBS) and Stanbic IBTC Bank.
The Stanbic IBTC’s latest Purchasing Managers’ Index (PMI) report shows that private sector growth dipped to a four-month low, with the PMI falling to 52.7 in May from 54.2 in April. While a PMI above 50 still signals growth, the drop indicates that the pace of business activity and new orders slowed noticeably.
The PMI is a key economic indicator that gauges the health of the manufacturing and services sectors. It reflects trends in new business, output, inventories, and employment.
The ICIR reports that the PMI is used to measure the health and direction of the manufacturing and services sectors’ businesses. It’s a key economic indicator that provides insights into business activity, including new orders, production, inventory (raw materials and finished goods), and employment.
Although the Nigerian private sector remained in growth territory midway through the second quarter of the year, the latest data showed there were signs of a slowdown in the latest survey period as inflationary pressures remained elevated.
“Inflationary pressures remained elevated in May, despite easing slightly from April. Purchase costs rose rapidly amid higher raw material prices, currency weakness, and increased transportation costs,” it stated.
The ICIR reported that Nigeria’s inflation eased to 23.71 per cent in April, from 24.23 per cent in March.
The latest inflation figures dropped sharply since January after the NBS adopted a new methodology for calculating the country’s consumer price index.
Stanbic IBTC specified that the rates of expansion in the production level and new businesses eased while employment data decreased for the first time in six months.
It said workforce numbers decreased for the first time in six months as some firms reported that difficulties paying staff had led to resignations.
The report noted that the drop in business confidence for the fourth consecutive month was among the lowest on record.
Commenting, the head of equity research in West Africa at Stanbic IBTC Bank, Muyiwa Oni, noted that business conditions remained in the expansionary territory for the sixth consecutive month in May.
He, however, said the pace of improvement slowed relative to April.
He, however, noted that input costs remain high in May, albeit slightly softer than April inflation, with the pace of price increase remaining well above the series average.
Oni believes that Nigeria’s business condition is on course to end the second quarter with a positive momentum, but at a weaker level than what was reported in the first quarter.
He said this is due to currency weakness, higher raw material costs, and increased transport prices have been more pronounced than seen in the first quarter.
“However, as inflation is expected to remain softer compared to the 2024 average, interest rates are likely to be lower this year, thereby helping to support the medium-term economic growth path.
“Therefore, we still maintain our expectation that the Nigerian economy is likely to grow by 3.5% y/y in real terms in 2025 relative to 3.4% y/y growth in 2024,” Oni added.