Business
Nigeria’s private sector growth slows in June, optimism rises
Growth in Nigeria’s private sector decelerated in June 2025, according to the latest Stanbic IBTC Bank Purchasing Managers’ Index
The figure reflects the slowest pace of expansion in seven months, yet business confidence soared to its highest level since August 2022, indicating optimism about the year ahead.
Despite the moderation, the PMI remained above the 50.0 threshold, which separates growth from contraction, confirming that the private sector is still in expansionary territory — albeit at a reduced pace.
“Business conditions remain in expansionary territory for the seventh consecutive month, but the pace of expansion has slowed for the third consecutive month after peaking in March,” said Muyiwa Oni, Head of Equity Research (West Africa) at Stanbic IBTC Bank. “The headline PMI settled lower at 51.6 points in June, below this year’s average of 53.1 points.”
The slower expansion was primarily driven by a sharp drop in manufacturing output, which weighed heavily on the composite index. While services, construction, and wholesale trade continued to grow, their momentum also slowed.
New business inflows rose but at a gentler pace, suggesting easing demand pressures. Many firms that reported growth linked it to new orders and improved customer acquisition strategies, especially in the retail and tech-adjacent sectors.
“Manufacturing’s slump is a concern, especially given its link to job creation and industrial output,” said Dr. Chinedu Obasi, an industrial economist. “Supply-side constraints and fragile demand are likely responsible for the sector’s drag on overall growth.”
In a sharp contrast to output trends, business sentiment surged. The PMI report revealed that the 12-month outlook for future output climbed to 83.9 points in June, up significantly from 70.9 in May — the highest reading since August 2022.
The report attributes the optimism to expectations of stronger investment, operational expansion, and a more favorable financing environment.
“Firms appear to be betting on macroeconomic stabilization and reform traction in the second half of 2025,” said Ngozi Ekeoma, a private equity analyst. “That optimism is critical, even if current conditions remain mixed.”
June also brought a second consecutive month of slowing inflationary pressures, with firms reporting more stable input prices and a more manageable cost environment. Output price increases were at their slowest rate in over two years, signaling a softening of pricing pressures across most sectors.
Nonetheless, manufacturers continued to pass higher input costs onto customers, leading to the sharpest price increases in that segment.
READ ALSO: Nigerian Banks post record profits as sector strengthens push toward $1trn economy
“The broader trend suggests inflation may be cooling, but manufacturing is still facing raw material cost issues,” said Kola Adeniran, financial analyst at Vantage Capital Advisory. “This underscores the need to stabilize supply chains and logistics.”
Employment levels were largely unchanged in June after a slight dip in May. Firms that did hire cited the need to manage existing workloads rather than respond to a demand surge. Hiring restraint reflected cautious sentiment in sectors with slowing demand.
Purchasing activity also rose, but at a slower pace. Companies noted that while they remained engaged in procurement, they were becoming more conservative due to subdued output growth and supply chain uncertainties.
Work backlogs continued to build for the third consecutive month, fueled by delayed payments, raw material shortages, and unreliable power supply. Some firms pointed to logistics bottlenecks, including poor road infrastructure and delays in supplier deliveries, as major constraints.
Supplier delivery times, which had improved steadily since March 2023, stabilized in June, ending a long period of gains. While delivery times were not significantly worse, the plateau suggests supply chain efficiencies may be peaking under current conditions.
“The slowdown in supplier improvements signals a need for logistics investments and power infrastructure upgrades,” said Dr. Aminu Bello, supply chain consultant. “Operational bottlenecks could limit the gains made in efficiency and output.”
While the June PMI reveals a cooling in private sector momentum, the surge in business confidence provides a silver lining. With firms looking ahead to expansion and investment, analysts say sustaining reforms and improving infrastructure will be key to translating optimism into stronger growth.
“The slowdown should not be seen as a reversal,” concluded Dr. Obasi. “Rather, it’s a recalibration as firms adjust to reform dynamics. The challenge is to convert confidence into real output through sound policy, infrastructure upgrades, and access to finance.”
Nigeria’s private sector remains on a growth path, but signs of fatigue — particularly in manufacturing — are becoming evident. With business sentiment rising sharply, the second half of 2025 will test the economy’s ability to overcome structural hurdles and maintain recovery momentum.