Economic activities expand for sixth straight month as cost pressures mount

Economic activities in Nigeria expanded for the sixth consecutive month in May, according to the Central Bank of Nigeria (CBN)’s latest Purchasing Managers Index (PMI) report.

The composite index rose to 52.1 points, signalling continued momentum across the country’s key sectors — industry, services, and agriculture. m The report highlighted broad-based gains, with the agriculture sector leading at 53.4 index points, followed by services at 51.7 and industry at 51.6. Within the industry sector, the petroleum and coal products subsector recorded the strongest expansion, while paper products posted the steepest decline.

“The composite PMI for May 2025, at 52.1 index points, indicated an expansion in economic activities for the sixth consecutive month,” the CBN stated, reflecting improving business sentiment after a sluggish 2024.

Agriculture, which has been a bright spot in recent months, recorded its tenth straight month of expansion — buoyed largely by new orders. Forestry led the pack, while fishing and fish farming contracted.The services sector showed mixed results.

Seven of the 14 subsectors tracked expanded, driven by increased incoming business. Educational Services posted the highest growth, but transportation and warehousing lagged behind.

Yet, beneath the headline numbers, warning signs are emerging. Businesses across sectors are grappling with rising input costs, outpacing output prices — a pattern that could squeeze profit margins and eventually stoke inflation.

“Input price indices for the composite, industry, services and agriculture sectors were higher than their output price indices, indicating that businesses faced cost pressure,” the report warned.

Analysts say the trend is encouraging but caution that cost absorption may not be sustainable. “The growth momentum is clear, but rising input costs without equivalent output price adjustments will eventually hurt margins — especially in agriculture, which is already under strain,” Shola Adegbite, an Abuja based senior economist told BusinessDay.

Agriculture recorded the highest cost absorption index at 10.5 points, compared to just 4.4 points in the services sector.

Firms’ ability to continue absorbing costs without passing them on to consumers remains in doubt, raising concerns over inflationary spillovers in the coming quarters.

While the data suggest resilience in Nigeria’s real economy, the underlying cost dynamics hint at a potentially fragile recovery. The CBN emphasised that the sustained expansion “underpins a favorable outlook for the second quarter of 2025,” but how long that momentum holds in the face of mounting price pressures remains to be seen.