Nigeria’s private sector returned to expansion in February as inflationary pressures eased to their weakest level in more than six years, according to a report released on Monday by S&P Global.
The Purchasing Managers’ Index (PMI) rose to 53.2 from 49.7 in January, signalling a renewed improvement in business conditions after a brief contraction at the start of the year. Readings above 50 indicate expansion.
The rebound was driven by stronger customer demand, improved affordability and firmer exchange-rate stability, which helped cool input costs across sectors.
Except for January’s dip, operating conditions have strengthened consistently since December 2024, pointing to sustained business momentum.
Demand surges, lifting output
S&P’s report highlighted stronger demand in February , supported by higher customer numbers and competitive pricing strategies. The upturn in demand translated into a marked acceleration in output, which expanded at its fastest pace in four months.
All four sectors monitored by the survey recorded growth, with wholesale and retail rebounding after a January slowdown. Employment levels also rose for the ninth consecutive month as firms scaled up hiring to meet rising workloads. The pace of job creation was the strongest since October last year.
However, backlogs of work increased at the sharpest rate since May 2020. Survey respondents linked the build-up in outstanding business to delayed customer payments, staffing shortages and persistent power supply challenges.
To keep pace with demand, companies expanded purchasing activity and inventory accumulation. Supplier delivery times shortened further, aided by prompt payments and improved traffic conditions in key commercial hubs.
Currency stability cools inflationary pressures
A key feature of the new survey was the marked easing in cost pressures and selling prices, which S&P attributed in part to the appreciation of the naira in recent weeks.
Both purchase cost inflation and output price growth rose at the softest pace in six years, even though some firms reported higher prices for animal feed and raw materials
Overall, the trend reflected improved exchange-rate conditions and moderating imported inflation.
Commenting on the findings, Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, said “local currency appreciation helped to support softer input and output prices in February, as the naira has been trading below 1400 against the USD consistently since 29 January.”
Oni also cited strengthening external accounts, improved remittance flows and central bank interventions in the foreign exchange market as factors underpinning currency stability.
Growth outlook strengthens
The improved business environment is feeding into stronger growth projections. Oni said the Nigerian economy is on track to expand by 3.86% year-on-year in the first quarter of 2026, with full-year growth forecast at 4.1%.
He attributed the outlook to visible government investment in infrastructure and livestock development, easing trade constraints and renewed capital inflows into oil, gas and manufacturing. The continued ramp-up of operations at the Dangote refinery is also expected to generate forward linkages across sectors.
Looking ahead, the rating agency noted that business confidence strengthened in February, supported by advertising initiatives and expansion plans. While sentiment remains relatively subdued compared to historical highs, firms expect output to increase over the next 12 months.
If exchange-rate stability holds and inflation continues to moderate, analysts say lower interest rates could further support private consumption and investment, broadening the base of Nigeria’s economic recovery in 2026.
Emboldened by sustained disinflation, the central bank of Nigeria cut its benchmark lending rate by 50 basis points to 26.5% last month, marking the second reduction in six months aimed at lowering borrowing costs for businesses.
