THE downward trend of the naira has negative impacts on  Nigerian businesses, as they are expected to grow more slowly in the second quarter(Q2) of this year than the pace of growth in the first quarter (Q1)

The Stanbic IBTC Bank made this projection in its latest report on the Purchasing Managers’ Index (PMI) released on Friday, May 2.

It attributes the slower growth to the naira depreciation currently being witnessed in the second quarter.

The ICIR can report that the naira has depreciated against the United States dollar from N1,531.25/$1 on April 2 to N1,602.02/$1 on April 29 at the official Nigerian Foreign Exchange Market.

Discussing the report, the bank’s head of Equity Research West Africa, Muyiwa Oni, said, “Nigeria’s business conditions started second quarter(Q2) 2025 on a positive note, and we expect this trend to be maintained, albeit relatively slower than witnessed in first quarter  (Q1) 2025.

“This is as the local currency is expected to depreciate in second quarter (Q2) 2025 compared to  first quarter (Q1) 2025 amid the lingering global uncertainties.”

He stressed that the anticipated slow growth in business activity could also lead to a slightly higher inflation rate than seen in the first quarter of the year.

“Nonetheless, interest rates are likely to be lower this year amid moderate inflationary pressures, thereby helping to support economic growth over the medium term.

“Overall, we still maintain our expectation that the Nigerian economy is likely to grow by 3.5%  year-on-year (y/y) in real terms in 2025 relative to 3.4%  year-0n-year (y/y) growth in 2024,” Oni said.

Continuing on the report, he noted that inflationary pressures ticked up from March but remained muted relative to the picture in 2024.

According to the report, private sector business activity slowed down in April as the PMI dropped slightly to 54.2 points from 54.3 points in March.

According to the Stanbic IBTC report, when a PMI reads above 50.0 points, it indicates an improvement in business activity but below a contraction.

Explaining this Oni said private sector business activity maintained its positive momentum into the start of the second quarter of the year as the PMI settled at 54.2 in April – broadly in line with 54.3 recorded in March.

He attributed the improvement primarily to improved customer demand amid softening inflationary pressures, helping to support higher new orders.

“Accordingly, all the four monitored sectors posted an improvement in business activity with the most significant improvement seen in the Services sector.

“In line with this improvement, the employment level increased for the fifth consecutive month, although the pace of increase was modest this time,” Oni said.

He noted that inflationary pressures continue to soften relative to 2024 as factors that significantly drove prices upward last year have moderated so far this year in terms of impacts.

However, inflation increased in April compared to March, worsened by the impact of local currency depreciation and higher energy costs.

“Indeed, overall input prices increased across all the four monitored sectors with the Manufacturing sector witnessing the strongest
inflationary pressures of the month.

“The pass-through of the higher input costs to customers meant that output price inflation also quickened in April but remained among the weakest in the past two years,” he added.