By Chinwendu Obienyi
Nigeria’s private sector activity slowed in May 2025 as business confidence weakened and firms grappled with persistent cost pressures, according to the latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) report, compiled by S&P Global.
The headline PMI declined to 52.7 points, down from 54.2 in April, marking the weakest improvement in business conditions since January. While the index stayed above the 50.0, a no-change threshold, this indicates continued growth as the pace of expansion slowed notably.
This is coming after a NESG-Stanbic IBTC Business Confidence Monitor (BCM) revealed on Monday that while the country’s business environment maintained a generally positive direction, the momentum of growth slowed owing to increasing toll of operational inefficiencies, rising costs and fragile macroeconomic conditions.
Similar to the NESG-Stanbic BCM report, the PMI report compiled by S&P Global report flagged a growing sense of caution among businesses, with employment levels falling for the first time in six months.
According to the report, firms cited challenges in meeting wage obligations and a rise in voluntary resignations, contributing to a modest drop in headcount.
Despite fewer staff, labour shortages pushed up work backlogs, with the increase in outstanding business being the sharpest since February 2023. Meanwhile, delayed customer payments further constrained project completion.
“Staff costs were up, but at the slowest pace in over two years as firms trimmed their workforce to contain rising expenses,” the report noted.
Also, growth in output and new orders eased, both rising at the slowest pace in four months, as some firms pointed to a softening in market demand.
Still, business activity remained broadly resilient, with sectors like wholesale, retail, and manufacturing continuing to record expansion. Purchasing activity rose for the sixth month in a row, and inventory levels increased at the fastest rate since February, reflecting expectations of improved demand.
Input cost pressures persisted, driven by higher raw material prices, currency weakness, and elevated transport costs. Although some firms reduced prices to attract customers, output charges remained high, with inflation easing to a two-year low.
“Purchase costs rose rapidly, yet the pace of output price inflation softened, suggesting some firms are absorbing costs to stay competitive,” said Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank.
One of the more striking findings in the May PMI was the continued erosion of business confidence, which declined for the fourth consecutive month, reaching one of its lowest levels on record.
Nevertheless, a majority of businesses maintained a positive 12-month outlook, buoyed by expansion strategies, marketing campaigns, and inventory restocking plans.
While market conditions are showing signs of strain, the outlook for Nigerian business activity remains anchored in recovery momentum and structural reforms,” Oni said.
Stanbic IBTC projects that Nigeria’s economy will grow by 3.5 per cent year-on-year in 2025, slightly higher than the 3.4 per cent expansion in 2024, supported by expected interest rate cuts and a gradual easing of inflation.
“Nigeria’s business environment is on course to end the second quarter on a positive note, although the momentum has softened compared to Q1,” Oni added.
The Stanbic IBTC Nigeria PMI is based on data collected from around 400 private sector companies across key segments, including agriculture, manufacturing, construction, wholesale, retail, and services.