The Nigerian private sector saw a notable expansion in February 2025, with the Purchasing Managers’ Index (PMI) rising to 53.7 from January’s 52.0. This marks the highest PMI reading since January 2024, reflecting strengthened business conditions for the third consecutive month. The surge in private sector activity was primarily driven by increased demand, higher sales, and moderating inflationary pressures.
Key Highlights from the February PMI Report
Stronger Output and Rising Demand
The Nigerian economy showed resilience as output grew at the fastest rate in over a year. Higher sales and improved demand contributed to this growth across key sectors such as agriculture, manufacturing, services, and wholesale & retail. However, the wholesale & retail sector recorded only a fractional increase. The report highlighted that businesses experienced greater customer willingness to commit to new projects, supporting the sharp rise in new orders.
Inflationary Pressures Easing, but Cost Challenges Persist
Although inflation remains a concern, input cost inflation slowed to its weakest level in ten months. This was largely attributed to a stable exchange rate and moderating fuel prices. However, despite the slower rise in costs, businesses still faced higher prices for raw materials and staff wages. Staff cost inflation hit its highest level since March 2024, as firms increased salaries in response to the high cost of living.
Employment Growth Marginal Due to Rising Costs
Despite the expansion in output and demand, employment growth was only marginal in February. Rising cost pressures led to cautious hiring, with some firms reluctant to expand their workforce. Employment gains were primarily observed in the manufacturing and services sectors, whereas agriculture and wholesale & retail saw slight declines.
Purchasing Activity on the Rise
Businesses responded to the uptick in demand by ramping up their input purchases at the fastest rate since May 2023. This led to an increase in stocks of purchases for the third consecutive month. Additionally, suppliers’ delivery times improved significantly, reflecting better vendor performance and quicker transactions due to prompt payments.
Optimism Persists Despite Slight Dip in Business Confidence
Although businesses remain optimistic about future output growth, sentiment dipped slightly in February, falling below the historical average. The cautious outlook was shaped by cost challenges and economic uncertainties. However, many firms still expressed plans to expand operations, including opening new branches and enhancing export activities.
Economic Outlook: A Positive Trajectory for 2025
According to Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, Nigeria’s economic growth trajectory remains positive. The country’s real GDP expanded by 3.84% year-on-year in Q4 2024, up from 3.46% in the previous quarter. This brought full-year GDP growth for 2024 to 3.40%, compared to 2.74% in 2023. The services sector played a dominant role in GDP growth, contributing 79.0%, followed by agriculture (11.9%) and industries (9.0%).
Looking ahead, the non-oil sector is expected to continue driving economic growth in 2025, supported by exchange rate stability, improved FX liquidity, and anticipated lower borrowing costs. The non-oil sector is projected to expand by 3.4% year-on-year in 2025, while the overall economy is forecasted to grow at a rate of 3.5% year-on-year, with Q1 2025 growth expected to reach 3.55%.
Conclusion
The February PMI report paints a promising picture of Nigeria’s private sector recovery, signaling robust output growth and demand. However, businesses continue to navigate cost challenges, which may impact employment and expansion strategies. If inflationary pressures ease further and borrowing costs decline, the Nigerian economy could sustain its positive momentum throughout 2025.
With economic fundamentals gradually improving, Nigerian businesses may find greater opportunities for growth, investment, and expansion in the coming months.
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