The Nigerian private sector witnessed a muted start to 2026 as the headline Purchasing Managers’ Index (PMI) dipped below the 50.0 psychological threshold for the first time in over a year, signaling a broad stagnation in new orders and business conditions.
According to the latest Stanbic IBTC Bank PMI report, the index fell to 49.7 in January, a significant drop from the 53.5 recorded in December 2025.
While readings above 50.0 indicate expansion, the January figure, the first sub-50.0 reading in 13 months, suggests a marginal deterioration in the health of the private sector, though analysts describe the current state as “broadly stable.”
The Post-Festive Hangover
The decline is largely attributed to a stagnation in new orders, ending a 14-month growth streak. Market analysts suggest this “lull” is a typical seasonal trend following the aggressive spending witnessed during the December festive period.
Muyiwa Oni, head of Equity Research for West Africa at Stanbic IBTC Bank, noted that while January usually sees lower activity than December, this particular reading carries extra weight.
“This is the first time in the history of the PMI survey (since 2014) that the January headline PMI will be below the 50-point threshold,” Oni stated, suggesting that deeper structural issues may be at play alongside the seasonal quiet.
Sectoral Performance: Retail Struggles While Services Hold Firm
The weakness was not uniform across the economy. The data revealed a sharp divide between sectors: Wholesale & Retail: Experienced a significant contraction, falling deep below the growth threshold. Agriculture, Manufacturing, and Services: All maintained growth, posting readings above 50.0.
Despite the stagnation in orders, Nigerian firms continued to expand their workforces. Employment increased for the eighth consecutive month, as companies sought to motivate staff amid rising living costs.
This increase in headcount, combined with stable order books, allowed firms to clear backlogs of work at the fastest rate since March 2025.
Inflationary Pressures Return
A concerning trend in the January report was the sharp rise in output prices, which hit a four-month high. Companies reported that faster rises in purchase prices and raw material costs forced them to pass these expenses onto consumers.
Staff costs also surged at the most marked pace since July 2025, driven by wage increases aimed at helping employees navigate higher inflation.
Outlook: A 4.1% Growth Projection
Despite the “negative surprise” of the January data, Stanbic IBTC remains bullish on Nigeria’s economic trajectory for the rest of the year.
The bank maintains a GDP growth forecast of 4.1% y/y for 2026.
“We expect demand to pick up in subsequent months,” Oni added. The optimistic outlook is anchored by several “forward-linkage” factors, including:
- Infrastructure & Investment: Visible government activity in livestock development and trade facilitation.
- Energy Sector: The continued impact of the Dangote Refinery on the broader economy.
- Monetary Stability: Anticipated lower interest rates and a stabilized exchange rate are expected to boost private consumption and business investment.
While business sentiment dipped slightly in January, the majority of Nigerian firms remain confident that output will rise over the next 12 months, supported by planned expansions and hopes for a resurgence in domestic demand.
