Nigeria’s Private Sector Slips into Contraction as PMI Falls in January

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Private sector business activity in Nigeria deteriorated in January 2026, according to the latest Purchasing Managers’ Index (PMI) released by Stanbic IBTC Bank Nigeria.

The report shows that the index fell sharply to 49.7 in January, down from 53.5 in December for the first time since 2014, ending a 13-month streak of expansion and signalling a deterioration in overall business conditions at the start of the year.

It stated that weaker demand pushed the headline index below the 50-point expansion threshold.

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.

A PMI reading of above 50.0 signals expansion in business conditions, while a reading below 50.0 points to a contraction.

According to the report, the contraction points to a deterioration in business conditions at the start of the year.
The decline reflected a broad stagnation in new orders, which led to much slower growth in output and purchasing activity.

It noted that while some firms reported increased customer numbers, these gains were offset by demand weakness elsewhere, resulting in new orders stalling after 14 consecutive months of growth.

The Stanbic IBTC data stated that the slowdown was concentrated in wholesale and retail trade, which recorded contractionary conditions.

In contrast, agriculture, manufacturing and services continued to expand, helping to keep the headline PMI close to the neutral level despite the overall decline.

It stated that purchasing activity and stocks of inputs rose at much slower rates than in December, in line with subdued demand; however, employment continued to increase at a similar pace to the previous month, with staffing levels rising for the eighth consecutive month.

It said the combination of modest job creation and stagnant new orders allowed firms to reduce backlogs of work for the first time in three months, marking the sharpest decline in outstanding business since March 2025.

The report shows that cost pressures intensified in January as purchase prices rose sharply amid widespread reports of higher raw material costs, pushing input price inflation to a three-month high.

Staff costs also increased at the fastest pace since July 2025, as companies raised wages to support employees facing higher living costs.

It noted that firms passed some of these higher costs on to customers, raising selling prices at the fastest rate in four months.

The report also hinted that business confidence dipped during the month, but firms remained optimistic about the outlook.

It added that many companies continued to expect output to rise over the coming year, citing planned expansions, higher inventory levels and hopes of stronger demand.

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Commenting on the data, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “After 13 months of consecutive reading above the 50-point no-change mark, Nigeria’s private sector activity deteriorated to 49.7 points in January from 53.5 in December.

“This is as new orders stagnated following a 14-month sequence of growth – likely linked to the weak demand that usually occurs at the start of the year after the festive-induced spending in December of the prior year…

“Nonetheless, this is the first time in the history of the PMI survey (since 2014) that January headline PMI will be below the 50-point psychological threshold…”

Oni added that despite the negative surprise in the PMI numbers in January, the bank still sees the Nigerian economy growing by 4.1 per cent year-on-year in 2026.

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