Dike Onwuamaeze

The Nigerian private sector suffered a decline in productivity, which was attributed to slowdown in the pace of expansion in manufacturing production.

This is stated in the Purchasing Managers’ Index (PMI) report of the Stanbic IBTC Bank Nigeria for June 2025, which said that the headline PMI reading fell from 52.7 in May to 51.6 in June.  

According to the report, “the rate of output growth eased particularly sharply, slowing for the second month running to a seven-month low. Sector data indicated that the slowdown in the pace of expansion reflected a fall in manufacturing production as activity continued to rise elsewhere.

“The headline PMI remained above the 50.0 no-change mark for the seventh consecutive month in June. That said, at 51.6, the reading was down from 52.7 in May and the lowest in the current growth sequence. The PMI signalled a modest improvement in business conditions in the private sector.”

It added that “where output rose, respondents linked this to higher new orders and the securing of new customers. Indeed, new business increased solidly in June, albeit here too the pace of expansion slowed and was at a five-month low.”

The report also said that June data pointed to a further sharp increase in overall input costs in the Nigerian private sector.

However, “the pace of inflation eased to the slowest in just over two years. All four monitored sectors posted a slower rise in total input costs during the month,” the report said.

Commenting on the PMI report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Mr. Muyiwa Oni, said that “business conditions remain in the expansionary territory for the seventh consecutive month in June, but the pace of expansion slowed for the third consecutive month after peaking in March.

“Specifically, the headline PMI settled lower at 51.6 points in June from 52.7 points in May, which is below this year’s average PMI print of 53.1 points.”

Oni also said that some firms noted muted demand conditions in June, while others witnessed higher activity linked to securing new customers and greater new orders.

“Nonetheless, optimism in the 12-month outlook for output surged higher to 83.9 points in June from 70.9 in May – the highest level since August 2022 (85.8 points) and moving much closer to the series average (89.4 points) after a period of historically subdued expectations,” he said.

He explained that survey participants linked this confidence to hopes that sufficient funding would be available to invest in improving and expanding operations.

Oni remarked that output price inflation slowed for the second month running in June and was the weakest since May 2023.

He, however, said that selling prices have continued to rise sharply as firms passed on higher input costs to customers.

“Manufacturing posted the fastest increase in output prices of the four broad sectors covered by the report. The employment level was broadly stable in June as companies that took on extra staff often did so to try to keep on top of workloads. That said, muted demand and cost pressures discouraged other firms from hiring,” Oni said.

According to him, insights from the monthly PMIs and crude oil production data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) suggested that the economy grew by an estimated 3.7 per cent year-on-year in the first half of 2025 and was supported by higher crude oil production and growth improvement across manufacturing and services.

But agriculture continued to lag its long-term average growth rate of 3.6 per cent.

He said: “Given that inflation is expected to remain softer compared to the 2024 average, interest rates are likely to be lower this year and next – we expect 150/200 bps rate cut in 2025 and 200/250 bps rate cut in 2026.

“These, in addition to structural reforms, removal of previous protectionist policies, and subsiding impact of the government’s flagship reforms should help to support the medium-term economic growth path. Therefore, we still maintain our expectation that the Nigerian economy is likely to grow by 3.5 per cent y/y in real terms in 2025, but post-GDP rebasing may amplify this growth to 4.2 per cent y/y.”