Stanbic IBTC Bank Nigeria PMI®: Business activity continues to rise, but higher fuel costs limit growth

 Stanbic IBTC Bank Nigeria PMI®: Business activity continues to rise, but higher fuel costs limit growth

The Nigerian private sector remained in growth territory at the start of the second quarter of the year as customer numbers and market demand continued to strengthen. That said, the impacts of higher fuel costs as a result of the war in the Middle East were felt again, pushing up prices and reportedly limiting expansions in new orders and business activity. The headline figure derived from the survey is the Stanbic IBTC Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. The headline PMI ticked up to 52.4 in April from 51.9 in March, above the 50.0 no-change mark for the third month running and signalling a solid strengthening in the health of the private sector. The rate of improvement was slightly greater than that seen in the previous survey period.

Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank commented: “The health of Nigeria’s private sector improved in April – remaining above the 50-points growth threshold for the third consecutive month – as new orders increased in line with higher customer numbers and rising demand even as price pressures remain prevalent. Accordingly, the headline PMI increased to 52.4 points in April from 51.9 points seen in March. Despite the improvement in new orders, we understand that lingering inflationary pressures limited the pace of expansion. Notably, companies increased their selling prices in April to the highest level since December 2024 in response to rising fuel and raw material costs. Staff costs also increased modestly as some companies increased their staff pay so as to help them with increasing transportation fares. Business expectations also improved in April compared to March as businesses plan to expand their operations through the opening of new branches, stock building, and entry into new markets.

“The improved start of the second quarter of the year by Nigerian businesses continues to support our view of improved growth expectations in 2026 relative to 2025. Hence, we still maintain our expectation that the Nigerian economy is likely to grow by 4.22% y/y in 2026, from 3.87% y/y in 2025. We estimate the non-oil sector’s growth at 4.24% y/y in 2026, from 3.71% y/y in 2025, likely driven primarily by services, which we see growing by 5.64% y/y in 2026 (vs 2025: 4.14% y/y). The government’s continuous investment attraction across oil & gas, solid minerals, electricity, agriculture and general manufacturing should continue to support sentiment on production activity. However, the oil sector’s growth is likely to moderate to 3.01% y/y (vs 2025: 8.50% y/y), as we now expect crude oil production (including condensates) to average 1.70m bpd, from 1.64m bpd in 2025.”

Improving demand conditions meant that new orders continued to rise, albeit with the rate of growth softening amid inflationary pressures. Business activity also increased, and at a solid pace that was slightly faster than that seen in March. Here too, however, companies mentioned that rising prices had limited the pace of growth. Activity rose in three of the four monitored sectors, the exception being services. Anecdotal evidence suggested that prices were often driven higher by increased fuel costs due to the war in the Middle East. Purchase prices increased rapidly, with the rate of inflation little-changed from March's 15-month high. Meanwhile, staff costs rose modestly as companies in some cases increased pay to help workers deal with higher transportation fares. The pass through of increased input costs to customers resulted in a further sharp rise in output prices, with the rate of inflation quickening to the fastest since December 2024.

Companies took on extra staff in April in response to rising workloads, but the rate of job creation was only marginal and the softest in three months. Some firms reported that staff shortages had been behind the latest accumulation of backlogs of work, while others cited customer payment delays and issues securing raw materials. Outstanding business increased for the third consecutive month in April.

Further efforts were made to secure materials, with purchasing activity increasing for the seventeenth month running in April. Stocks of purchases also rose amid improving customer demand, and at a marked pace that was the sharpest in five months. Where companies placed orders for materials, they often made sure to pay on time in order to secure deliveries. As a result, supplier lead times shortened again, albeit to the least extent in 2026 so far.

Business sentiment ticked higher in April, with companies often citing plans to expand operations. Half of all respondents predicted that their output will increase over the next 12 months.