Nigeria’s private sector activity slumps below growth threshold in January

Nigeria’s private sector began 2026 on a precarious footing as business conditions deteriorated for the first time in over a year.

According to the latest Stanbic IBTC Purchasing Managers’ Index (PMI) released by S&P Global, the headline index dropped to 49.7 in January, falling from December’s 53.5.

This dip below the critical 50.0 neutral mark ends a 13-month streak of expansion and signals a broad stagnation in the nation's economic engine.

The downturn was primarily driven by a stall in new orders, which halted a 14-month growth sequence. While some firms reported an influx of new customers, these gains were offset by a significant segment of the market reporting demand weakness.

This stagnation forced a slowdown in both output and purchasing activity. Sectoral data revealed that the slump was most acute within the wholesale and retail industries, whereas agriculture, manufacturing, and services managed to maintain marginal growth.

Despite the cooling demand, inflationary pressures intensified at the start of the year. Companies reported a sharp rise in purchase prices and raw material costs, pushing input price inflation to a three-month high.

Simultaneously, staff costs climbed at their fastest rate since July 2025 as businesses raised wages to help employees navigate the rising cost of living and maintain morale. In response to these mounting expenses, firms hiked their selling prices at the most aggressive pace seen in four months, effectively passing the burden onto consumers.

The labor market provided a rare glimmer of stability, with employment increasing for the eighth consecutive month. This steady hiring, combined with the lull in new orders, allowed companies to clear their backlogs of work at the fastest rate since March 2025.

Muyiwa Oni, Head of Equity Research for West Africa at Stanbic IBTC Bank, noted that while January typically sees a post-festive seasonal lull, this is the first time since the survey began in 2014 that the January reading has fallen into contraction territory.

This negative surprise suggests deeper underlying challenges beyond mere seasonal trends.

However, the outlook for the remainder of 2026 remains cautiously optimistic. Stanbic IBTC maintains a growth forecast of 4.1% for the year, banking on a recovery in demand and the fruition of government initiatives in infrastructure, livestock, and oil and gas.

The continued operations of the Dangote refinery are also expected to provide a significant forward-linkage boost to various sectors.

As inflation potentially eases and exchange rates stabilize, the private sector is expected to rebound, eventually translating into improved living standards after two years of rigorous economic reforms.