Nigerian companies recorded a muted start to 2026, with business conditions broadly stable but momentum easing, according to the latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index published on Monday.

According to the Stanbic IBTC Bank Nigeria PMI compiled by S&P Global, the headline PMI fell to 49.7 in January from 53.5 in December, dropping below the 50.0 threshold that separates expansion from contraction and signalling a slight deterioration in overall business conditions.

The decline in the PMI reflected a broad stagnation of new orders, which brought an end to a 14-month sequence of growth. While some firms reported increased customer numbers, this was offset by demand weakness elsewhere, leaving new orders little changed during the month.

In turn, output growth slowed sharply, rising only marginally in January after a stronger expansion at the end of 2025.

Sector data showed that the softness was concentrated in wholesale and retail trade. However, agriculture, manufacturing and services continued to record growth, helping to keep the headline PMI close to the neutral level and pointing to broadly stable conditions across the wider economy.

Purchasing activity and stocks of inputs also increased at much slower rates than in December, in line with the stagnation in new orders. At the same time, companies faced faster increases in purchase prices and staff costs. Respondents, who are purchasing managers in a panel of around 400 private sector companies, indicated that wages were raised to motivate employees and help them cope with higher living costs, while higher input costs were passed on to customers through increased selling prices.

As a result, the rate of output price inflation quickened to a four-month high. However, despite the acceleration, inflation remained among the weakest since the COVID-19 pandemic. Employment continued to increase at a broadly similar pace to that recorded at the end of 2025, marking one of the more positive elements of the January survey. The sustained rise in staffing levels pointed to companies maintaining confidence in underlying demand, even as short-term conditions softened.

In January, business sentiment dipped during the month, but firms remained optimistic that output would rise over the coming year. Confidence was linked to planned expansions, greater stock holdings and expectations of stronger new orders, indicating that companies continue to anticipate an improvement in activity despite the slower start to 2026.

Commenting on the report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “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. This is as 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 the festive-induced spending in December of the prior year.

“Historical data in the past six years also confirms this, where the headline PMI in January was lower than December of the prior year, except for January 2024. Indeed, the weak business activity was more pronounced in the wholesale & retail sector, which was deep below the 50-point growth threshold on a seasonally adjusted basis, while agriculture, services and manufacturing activity witnessed growth in the period, as they were all above 50.0 points. Nonetheless, this is the first time in the history of the PMI survey (since 2014) that the January headline PMI will be below the 50-point psychological threshold, thereby likely signalling deeper issues aside from quiet activity that usually occurs in January after festive-induced improvements in December. Elsewhere, output prices increased markedly to a four-month high in January, with the companies linking this to higher purchase costs.”

Despite the negative surprise in the PMI numbers in January, Oni maintained that the firm holds that the Nigerian economy would grow by 4.1 per cent year-on-year in 2026, “as we expect demand to pick up in subsequent months after the lull seen at the beginning of the year. Notably, the government has been visible in infrastructure, livestock development, easing trade constraints, and attracting investments in oil & gas and manufacturing. Aside from that, the Dangote refinery is expected to continue to have a forward-linkage impact on other sectors of the economy.

“Additionally, likely lower interest rates in line with lower inflation and exchange rate stabilisation should support private consumption and business investments in 2026. Because of these factors, we see more sectors contributing to the real GDP growth rate in 2026 compared to 2025, likely translating to an improvement in the quality of life of the citizens compared to the last two years when the citizens witnessed the full negative impact of the government’s flagship reforms.”