The Independent Media and Policy Initiative (IMPI) has established a clear connection between Nigeria's sustained Purchasing Managers' Index growth and the consistent decline in inflation rates over the past seven months. According to the prominent think tank, this relationship demonstrates the improving health of the nation's economy.
PMI Expansion and Inflation Correlation
In a statement signed by its Chairman, Dr Omoniyi Akinsiju, IMPI confirmed that Nigeria's PMI has recorded eleven consecutive months of expansion since the beginning of 2025. The group employed advanced statistical methods, including the Predictive Regression model using Ordinary Least Squares techniques, to model inflation as a function of key economic drivers.
The analysis revealed an inverse relationship between PMI movements and inflation rates, with higher PMI readings indicating reduced inflation due to increased production and productivity across 36 economic sectors. The October PMI reading reached 55.4, indicating strong and broad-based growth driven by output expansion, new orders, and employment gains.
Monthly Performance Analysis
IMPI provided detailed monthly comparisons showing how PMI movements directly influenced inflation trends throughout 2025. The PMI has remained consistently above the 50.0 threshold all year, signaling sustained economic expansion.
In April 2025, the Central Bank of Nigeria reported a composite PMI of 52.40 index points, up from 52.30 in March. This slight increase corresponded with inflation easing to 23.71% year-on-year from March's 24.23%.
May saw a slower PMI uptick to 52.1, which reflected in a modest inflation decline to 22.97% from April's 23.71%. The pattern continued in June with PMI expanding by 0.2 index points to 52.3, while inflation eased to 22.22%.
The trend accelerated significantly in September, with PMI rising to 54.0 and inflation improving dramatically from 20.12% in August to 18.02% in September - a substantial 2.1% decline. October's performance was even more impressive, with PMI reaching 55.4 and inflation dropping to 16.05% from September's 18.02%.
Year-End Projections and Policy Expectations
IMPI reaffirmed its position that Nigeria's inflation rate will decline to 14% by the end of 2025, as originally projected in their Policy Statement 030. The think tank also expects further PMI expansion in November and December, which should drive corresponding improvements in inflation figures.
Regarding monetary policy, IMPI maintains that the softer inflation outlook justifies additional easing by the Central Bank. The group had previously projected in Policy Statement 029 that the Monetary Policy Committee would reduce the Monetary Policy Rate by 150 basis points to 26% by year-end.
The MPC took an initial step in September by cutting the MPR by 50 basis points to 27% from 27.50%. IMPI now expects the committee to reduce the rate by another 100 basis points to 26.0% during its November 24-25 meeting, where it will determine the country's benchmark interest rate.
The consistent relationship between PMI expansion and inflation reduction provides strong evidence for continued economic improvement through the remainder of 2025, according to the think tank's comprehensive analysis.
