Nigeria’s manufacturing sector recorded a slower pace of expansion in January 2026, underscoring the growing pressure of elevated production costs, subdued consumer demand, and persistent structural bottlenecks weighing on industrial activity.
According to the latest NESG–Stanbic IBTC Business Confidence Monitor (BCM), manufacturing activity remained in growth territory but weakened notably, with the sector’s index easing to 115.8 points in January, down from 117.9 points in December 2025. The reading represents the sector’s weakest performance in six months.
The report shows that while overall business conditions in the economy stayed positive, momentum softened as manufacturers grappled with rising operating expenses, post-festive demand moderation, and infrastructure-related challenges, particularly in chemicals, pharmaceuticals, plastics, and rubber-related industries.
Business Conditions Weaken Despite Expansion
The Current Business Performance Index declined to 105.8 points in January, compared with 112.0 points in December, marking the lowest level since mid-2025. Although the index remained marginally higher than the 105.7 points recorded in January 2025, the month-on-month decline signals increasing strain across productive sectors.
NESG noted that sectoral performance remained uneven. Non-manufacturing activities continued to support overall expansion, while manufacturing and trade faced growing headwinds linked to cost pressures and fragile demand conditions.
Operational expenses, coupled with infrastructural constraints and post-holiday spending pullbacks, continued to erode investor confidence and dampen output growth across key segments of the economy.
Sector Breakdown Highlights Broad-Based Slowdown
A closer look at the January BCM data reveals a mixed but generally weaker performance across sectors:
- Manufacturing slowed to 115.8 points, from 117.9 points in December.
- Services declined to 102.1 points, down from 104.3 points, though still within expansion territory.
- Agriculture slipped into contraction at 99.5 points, falling sharply from 112.9 points.
- Trade weakened further into contraction at 92.7 points, from 123.8 points in December, ending several months of expansion.
NESG attributed the overall slowdown to post-festive moderation in economic activity, persistent cost pressures, and weak consumer purchasing power, which collectively constrained business operations.
Cost Pressures Intensify Across the Economy
Rising costs emerged as a dominant challenge in January, compounding long-standing structural issues.
The Cost of Doing Business Index surged to 90.5 points, up sharply from 54.7 points in December, while input prices climbed to 96.9 points from 68.9 points over the same period.
NESG linked the spike to recent tax policy adjustments, fuel price changes, and lingering inflationary pressures. Businesses also continued to face limited access to financing, unstable power supply, escalating commercial property rents, and poor transport and logistics infrastructure.
These combined pressures squeezed profit margins and disrupted production schedules across multiple sectors, particularly within manufacturing.
Sub-Sectors Feel the Strain
Within manufacturing, the slowdown was more pronounced in select sub-sectors, reflecting deeper vulnerabilities.
- Chemical and Pharmaceutical Products, alongside Plastic and Rubber Products, recorded the steepest declines.
- Wood and Wood Products and Non-Metallic Products slipped into contraction territory.
- Textiles, Apparel and Footwear, Cement, Motor Vehicles and Assembly, and Other Manufacturing segments either maintained marginal growth or remained broadly flat.
NESG highlighted limited financing options, recurring power outages, raw material shortages, insecurity, poor infrastructure, and rising input costs as key factors driving higher production expenses and constraining new investments within the sector.
Non-Manufacturing Sector Provides a Buffer
In contrast, non-manufacturing activities strengthened during the month, offering some resilience amid broader economic challenges. The Non-Manufacturing BCM Index rose to 115.3 points in January, from 110.2 points in December 2025, marking a sharp turnaround from contraction recorded in January 2025.
Growth was largely driven by improved performance in Oil and Gas Services and Crude Petroleum, both of which moved firmly into expansion territory. Although growth in Construction and Natural Gas moderated compared to December, both sectors remained positive.
The data suggests that non-manufacturing sectors could continue to act as a stabilising force for the economy as manufacturing activity remains under pressure.
Services and Trade Struggle to Regain Momentum
The Services and Trade sectors showed increasing signs of stress during the period. Services activity slowed amid weaker conditions in Financial Institutions, Real Estate, and Telecommunications and Information Services, even as Professional, Scientific and Technical Services recorded some improvement.
Trade activity deteriorated further, with the index falling to 92.7 points, reflecting sharp contractions in wholesale trade. NESG attributed the downturn to inventory drawdowns, elevated operating costs, and subdued post-festive demand. These developments highlight the fragile nature of Nigeria’s economic recovery, with manufacturing and trade still exposed to significant downside risks despite isolated areas of growth.
Outlook Remains Cautious
Despite January’s slowdown, NESG noted that Nigeria’s business environment had extended its expansion streak to 12 consecutive months as of December 2025. However, the Future Business Expectation Index edged lower to 132.6 points in December, from 134.8 points in November, suggesting cautious optimism among businesses amid ongoing macroeconomic and structural challenges.
