Nigeria's private sector is experiencing its most robust performance in half a year, according to the latest Purchasing Managers' Index (PMI) data. The recent figures reveal a significant acceleration in business activity, marking the fastest expansion since the beginning of the year.
Economic Momentum Builds
The Stanbic IBTC Bank Nigeria PMI climbed to 52.5 in May 2024, up from 51.1 in April, indicating a substantial improvement in private sector conditions. This reading above the 50.0 threshold signals expansion, with businesses reporting the strongest output growth in six consecutive months.
Drivers of Growth
Several key factors are fueling this economic resurgence:
- Surge in new orders as customer demand strengthens across multiple sectors
- Improved market confidence leading to increased business investments
- Enhanced purchasing activity as companies prepare for higher production levels
- Employment growth as firms expand their workforce to meet rising demand
Inflation Challenges Persist
Despite the positive growth trajectory, Nigerian businesses continue to face significant headwinds. Input costs rose at the second-fastest rate in the survey's history, primarily driven by currency depreciation and rising material prices.
"The survey data indicates that purchase costs increased substantially again in May, largely due to currency weakness," noted Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank.
Sector Performance
All four broad sectors covered by the survey reported higher output, with wholesale and retail companies leading the expansion. The services and manufacturing sectors also showed strong performance, while construction activity grew at a more moderate pace.
Future Outlook
Business confidence remains positive, with many companies expecting further improvements in economic conditions. However, the pace of optimism moderated slightly from April's record high, reflecting concerns about ongoing inflationary pressures.
The combination of robust output growth and persistent cost pressures presents both opportunities and challenges for Nigeria's private sector as it navigates the path to sustained economic recovery.
