Dike Onwuamaeze
The output of the manufacturing sector decreased as steep intensification of inflationary pressures that were propelled by higher fuel costs slowed growth in the economic activity of the Nigerian private sector at the end of the first quarter of 2026.
This is according to the Purchasing Managers’ Index (PMI) report of the Stanbic IBTC, which stated that although business activity in Nigeria’s private sector continued to rise in March, the rate of expansion eased from that seen in February and was only modest.
The report stated, “The rate of growth was only slightly softer than that seen in February. The rate of expansion in business activity slowed more markedly, however, and was only modest overall. A number of firms continued to raise output in response to higher new orders, but others suggested that rising fuel costs had limited growth.”
It also highlighted that the ongoing tensions in the Middle East pose a downside risk to the growth outlook as higher inflation emanating from sustained increase in fuel prices may lead to higher-for-longer interest rates.
It added, “This may influence a slowdown in demand conditions should the tensions continue to escalate.”
Commenting, the Head of Equity Research, West Africa, at Stanbic IBTC Bank, Mr. Muyiwa Oni, said; “The headline PMI posted 51.9 in March, down from 53.2 in February but still above the 50.0 no-change mark and therefore signalling an improvement in the health of the private sector during the month. Business conditions have strengthened in 15 of the past 16 months.
“Output growth was only modest, but underlying demand reportedly remained resilient, leading to a further sharp rise in new orders. In turn, firms continued to expand their employment and purchasing activity.”
Oni added, “While higher fuel costs and power supply issues contributed to a slowdown in the growth of Nigeria’s private sector activity, underlying demand remains strong. This is reflected in an increase in customer demand and the associated impact of new product launches, both of which supported an improvement in new orders.
“Businesses also remained optimistic about increases in future output amid their plans to invest in business expansions and boost promotional efforts. Nonetheless, input prices rose markedly at the sharpest pace since January 2025, with all four monitored sectors seeing sharper rates of inflation.”
He added that the PMI numbers in Q1:26 were consistent with an estimated 3.99 per cent y/y GDP growth for the quarter after also accounting for crude oil sector’s performance.
“We now see the Nigerian economy growing by 4.22 per cent y/y in 2026, from 3.87 per cent y/y in 2025, with the oil sector growth slowing to 3.01 per cent y/y (vs 2025: 8.50% y/y), as we now expect crude oil production (including condensates) to average 1.70m bpd, from 1.64m bpd in 2025.
“We estimate the non-oil sector’s growth at 4.24 per cent y/y in 2026, from 3.71 per cent y/y in 2025, likely driven primarily by services, which we see growing by 5.64 per cent y/y in 2026 (vs 2025: 4.14 per cent y/y).
“The government’s continuous investment attraction across oil & gas, solid minerals, electricity, agriculture and general manufacturing should continue to support sentiment on production activity,” he said.
The steep increase in input costs, he said, was reflected in a much sharper rise in selling prices, one that was the most pronounced in 15 months.
“Close to 42 per cent of panellists reported a rise in charges, with less than 1% lowering selling prices. Rates of output price inflation accelerated sharply across all four monitored sectors,” he stated.
The PMI report said that the end of the opening quarter of the year saw a marked acceleration in the rate of overall input cost inflation, with input prices rising at the sharpest pace since January 2025.
It said: “Underlying data showed that the acceleration was due to much higher purchase prices as staff costs rose at a slower pace over the month.All four sectors saw a quicker pace of inflation, with manufacturing posting the fastest rise.
“Purchase costs increased rapidly in March, often reflecting rising fuel prices. Just under half of all respondents signalled higher purchase costs during the month as the rate of inflation quickened to a 15-month high. Agriculture and manufacturing registered the sharpest increases in purchase prices.”
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