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By Chinwendu Obienyi
Nigeria’s economy is showing early signs of regaining momentum heading into 2026, as stronger business activity, easing inflation and a firmer naira has helped restore confidence among companies battling years of currency volatility and rising costs.
This is after the recent data from the Central Bank’s Purchasing Managers’ Index (PMI) suggested that the private sector may be entering its most stable phase in more than a year, raising optimism that Africa’s largest economy could post a stronger growth performance next year.
The term “Central Bank’s Purchasing Managers’ Index (PMI)” refers to a specific economic indicator that measures the health of the manufacturing or services sector. It shows whether businesses are generally expanding or slowing down,
The composite PMI rose to 55.4 points in October, its eleventh consecutive month above the 50-point expansion threshold and one of the highest readings in more than a year. Driven by increases in output, new orders and employment, the report analysed by Daily Sun, highlighted broad-based improvement across agriculture, services and industry at a time Nigeria is trying to stabilise after a turbulent macroeconomic period.
The sustained expansion is an important signal for policymakers, coming after months of reforms aimed at curbing inflation, restoring FX liquidity and reviving weak investor sentiment. The PMI, a widely used forward-looking indicator of economic direction, measures the level of business activity through monthly surveys covering output, new orders, employment, inventories, and supplier delivery times.
A reading above 50 indicates expansion, while below 50 suggests contraction. With October’s print not only above this critical threshold but also higher than the previous month, the sentiment across Nigeria’s productive landscape appears to be strengthening despite lingering structural constraints.
According to the data, agriculture remained the standout performer, with its PMI rising to 57.5 in October from 55.4 previously. The sector recorded its fifteenth consecutive month of expansion, buoyed by improved yields, stronger new orders and favourable harvest conditions.
All five agricultural sub-sectors stayed in positive territory despite moderations in forestry, fish farming and agricultural support services. This comes as the country continues to battle elevated food inflation, driven by insecurity in farming regions and supply bottlenecks.
Analysts say the sustained gains suggest food output could improve modestly in the near term, helping relieve pressure on consumer prices. “Agriculture is doing the heavy lifting right now. The harvest season and improved access to inputs are beginning to show up in the numbers”, they said.
Furthermore, the services sector, which accounts for more than half of GDP, expanded for the ninth straight month, with PMI rising to 55.6 from 54.7. The improvement was broad, with 11 out of 14 sub sectors recording growth. Business activity, inventories and new orders strengthened, while employment moderated slightly but remained above the expansion threshold.
Telecommunications, finance, trade and transport sectors heavily exposed to consumer demand, benefited from easing price pressures and improved FX conditions, helping restore some purchasing power lost earlier in the year. This means that consumers are slowly adjusting to the new price environment and businesses are responding.
Industry posted one of its strongest readings since last year, with the PMI rising sharply to 54.2 from 51.4. Production, new orders and employment saw meaningful gains, supported by improved access to raw materials and clearer FX liquidity conditions. Nine industrial subsectors expanded during the month.
Petroleum and coal products were the weakest performers, highlighting Nigeria’s persistent challenges with local refining, high energy costs and volatile supply chains. Still, the broader industrial momentum points to early signs of stabilisation after months of disruption.
Manufacturers also reported improvements in supplier delivery times, suggesting early gains in logistics efficiency after a year marked by shortages and long lead times.
Macro-conditions show signs of firming
Nigeria’s inflation rate has been easing gradually, falling from 24.5 per cent in January to 18 per cent in September. Meanwhile, the naira has firmed in both the official and unofficial markets, helped by monetary tightening earlier in the year, rising oil receipts and modest improvement in FX inflows.
These developments have helped temper cost pressures for businesses that depend heavily on imported inputs. Firms also cited improved access to credit as banks continue to raise capital in line with ongoing recapitalisation requirements.
Looking ahead, private sector conditions are expected to remain expansionary, supported by gradually improving macroeconomic fundamentals, including naira appreciation and easing inflationary pressures. In addition, the recent dovish shift in monetary policy is likely to ease tight financing conditions over time, reinforcing broader economic activity in the near term.
Between the first quarter of 2023 and the second quarter of 2025, analysts estimate a correlation of around 0.6 between Nigeria’s PMI and GDP growth, a moderate but reliable relationship. With October’s PMI above quarterly averages recorded earlier this year, markets expect stronger output figures in the months ahead.
Analysts’ react
Economists project that GDP could grow between 4.0 per cent and 4.5 per cent in 2025, supported by improved harvests, better FX stability and stronger activity in services and industry.
Afrinvest in its research note, said, “Specifically, for Q3 2025, we project GDP growth between 3.9-4.4 per cent, supported by the main harvest, re-opened land borders for grain imports, and improved currency stability amid ongoing capital-raising in the financial sector.
“We are looking at a potential turning point heading into next year. If FX conditions continue to improve and inflation keeps falling, there is room for a more broad-based recovery.”
For their part, analysts at Cordros Research said, “Looking ahead, private sector conditions are expected to remain expansionary, supported by gradually improving macroeconomic fundamentals, including naira appreciation and easing inflationary pressures. In addition, the recent dovish shift in monetary policy is likely to ease tight financing conditions over time, reinforcing broader economic activity in the near term”.
Conclusion
Despite the improving indicators, Nigeria still faces significant risks. Insecurity in agricultural corridors, erratic power supply, high logistics costs and ongoing challenges in the oil sector could weigh on growth. Global uncertainties, including oil price swings and tighter international financial conditions, also pose external risks.
But for now, the PMI numbers suggest that businesses are preparing for a more stable operating environment, helped by a mix of policy adjustments, easing cost pressures and improving demand conditions.
With firms posting stronger output, rising new orders and healthier inventory positions, Nigeria may be entering a phase of steady, if fragile, recovery that could support stronger GDP growth at the end of the year.
