Nigeria’s private sector started 2026 on a cautious note, with the latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) showing a decline in business activity. The headline PMI slipped to 49.7 in January from 53.5 in December, dropping below the 50-point threshold that separates growth from contraction. This marks the first time since the survey began in 2014 that January has recorded a PMI below the psychological 50 mark, signaling a slowdown in overall business conditions.
The dip in the PMI was largely driven by a stagnation in new orders, ending a 14-month period of growth. While some companies reported more customers, weaker demand in other areas kept overall orders flat. Output growth also slowed sharply, with production barely rising in January compared to stronger expansions at the end of 2025. The slowdown was particularly evident in the wholesale and retail trade sector, though agriculture, manufacturing, and services managed to maintain growth above the neutral level.
Companies also faced higher costs as purchase prices and wages rose. Many firms increased staff salaries to help employees cope with rising living costs, while higher input costs were passed on to consumers through increased selling prices. As a result, output price inflation accelerated to a four-month high, although inflation remained modest compared to post-COVID levels. Despite these challenges, employment growth continued at a steady pace, reflecting continued confidence in long-term demand.
Business sentiment dipped slightly in January, but companies remain cautiously optimistic about the year ahead. Planned expansions, stockpiling, and expectations of stronger new orders indicate that many firms anticipate a recovery in activity after the typical post-festive lull. Muyiwa Oni, Head of Equity Research at Stanbic IBTC Bank, noted that historical trends show slower activity in January, but this year’s dip may point to deeper challenges beyond seasonal trends.
Despite the weaker start, analysts remain confident that Nigeria’s economy will grow by 4.1% in 2026. Government investments in infrastructure, livestock development, and reforms in trade, along with the forward-linked impact of the Dangote refinery, are expected to stimulate demand. Lower interest rates and a stable exchange rate are also likely to support private consumption and business investment, suggesting that the private sector slowdown at the beginning of the year could be temporary.
source: punch