Nigeria’s business activity contracts in January for first time since 2014

Nigerian private sector activity weakened at the start of 2026, falling into contraction for the first time since the Purchasing Managers’ Index (PMI) survey began in 2014, as post-festive demand softness stalled new orders and slowed output growth.

The headline PMI dropped to 49.7 in January from 53.5 in December, sliding below the 50-point mark that separates expansion from contraction, according to the latest Stanbic IBTC Purchasing Managers’ Index (PMI). The decline ended a 13-month run of growth and pointed to broadly stagnant business conditions.

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“After 13 months of consecutive readings above the 50-point no-change mark, Nigeria’s private sector activity deteriorated to 49.7 points in January from 53.5 in December,” said Muyiwa Oni, the firm’s head of equity research for West Africa.

He attributed the slowdown largely to seasonal demand weakness following heavy spending during the December festive period.

“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 festive-induced spending,” Oni said.

The report disclosed that price pressures intensified in January as firms faced faster increases in purchase prices and staff costs, pushing selling prices up at the sharpest pace in four months.

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Historical trends support the seasonal pattern, with January PMI readings typically lower than December’s over the past six years, except in 2024, he added.

However, Oni warned that the latest contraction was unprecedented.

“This is the first time since the PMI survey began in 2014 that January’s headline PMI has fallen below the 50-point psychological threshold, which may signal deeper issues beyond the usual seasonal slowdown,” he said.

The report further disclosed that new orders were little changed during the month, cancelling out gains recorded by some firms and reflecting subdued demand across key sectors. Output rose only marginally, while purchasing activity and input inventories expanded at much slower rates compared with December.

Retail drag offsets growth in other sectors

Sector-level data showed the slowdown was driven largely by weakness in wholesale and retail trade, which fell deeper into contraction territory.

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In contrast, agriculture, manufacturing, and services continued to post growth, cushioning the broader economy from a steeper decline in activity.

Employment remained relatively stable, with companies increasing staffing levels for the eighth consecutive month, broadly matching the pace of job creation seen at the end of 2025.

Despite the weak start, Stanbic IBTC remains optimistic about Nigeria’s economic outlook.

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The bank forecasts economic growth of 4.1 percent in 2026, supported by government investment in infrastructure and livestock development, easing of trade constraints, and efforts to attract capital into oil and gas and manufacturing.

“The Dangote refinery is also expected to generate positive spillover effects across sectors, while easing inflation, lower interest rates, and greater exchange rate stability could support consumer spending and business investment,” the report disclosed.