Business Activity Moderates as PMI Slid to 53.4 Points in September

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Private sector business activity in Nigeria moderated as the Purchasing Managers Index (PMI) slid to 53.4 points in September despite the continued decline in inflationary pressure.

The slide in business activity was captured in the Stanbic IBTC Bank’s PMI report released on Thursday, October 2.

The report showed that PMI dropped to 53.4 points in September from 54.2 points in August, although maintaining the expansionary territory.

According to Stanbic IBTC, a PMI reading below 50.0 points signals a contraction in business activity, while a reading above that shows a growth or expansion in business activity.

Pinnacle Daily reports that PMI measures the health and direction of businesses in the manufacturing and services sectors.

It is a key economic indicator that provides insights into business activities, including new orders, production, inventory (both raw materials and finished goods), and employment.

Compiled by S&P Global, it receives responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies, including in agriculture, mining, manufacturing, construction, wholesale, retail and services.

According to the report, the Nigerian private sector remained comfortably inside growth territory as the third quarter of the year came to an end.

This reflects that improvements in output and new orders were recorded, while the pace of job creation quickened to the fastest in almost two years.

It showed that companies were helped by the recent easing of inflationary pressures, which largely continued into September.

In fact, firms’ purchase costs increased at the slowest pace in five-and-a-half years.

Pinnacle Daily reported that Nigeria’s headline inflation continued to decelerate for the fifth consecutive time in August to 20.12 per cent from 21.88 per cent in July.

The index showed companies continued to see a general easing of inflationary pressures in September.

It indicated that overall input prices increased at the slowest pace in two-and-a-half years amid weaker rises in both purchase prices and staff costs.

It further noted that the rate of purchase price inflation was the softest since March 2020.

Input costs also continued to rise at a marked pace overall, and companies thereby increased their own selling prices accordingly.

Despite ticking up from August, the pace of output price inflation was still the second-slowest in more than five years, the report stated.

Commenting on the report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “Nigeria’s business conditions ended the quarter on a strong note, although the pace of strengthening moderated relative to August.

“Specifically, the headline PMI settled at 53.4 points in September from 54.2 in August, buoyed by improvement in output and new orders, while inflationary pressures also continued to soften.”

He noted that the 56.1 points rate of expansion in output in September, relative to 56.8 points in August, remained strong despite easing slightly, linking it to improving customer demand and better availability of materials, which enabled the firms to boost activity.

“Based on this, businesses were able to launch new products, thereby supporting an increase in new orders (55.4 points vs August: 58.3 points) which remained above the 50-point growth threshold for the 11th consecutive month even as the rate of growth eased to a three-month low,” Oni explained.

He recalled that the Nigerian economy grew by 4.23 per cent year-on-year in the second quarter from 3.13 in the first quarter, taking the half-year real gross domestic product (GDP) growth to 3.69 per cent from a revised average of 2.88 per cent in the first half of 2024.

“Positively, the non-oil sector’s growth should remain strong into 2026 amid a likely reduction in interest rates and low inflation, both of which should support aggregate demand and private investment.

“Further, a likely lessening in exchange rate volatility in 2025 and 2026 based on our current estimates should support growth across trade, manufacturing, real estate, and construction,” Oni added.

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