Nigeria's economic activity has entered its fourth consecutive month of expansion, with the composite Purchasing Managers' Index (PMI) rising to 53 points in September. This growth is driven by industry, services, and agriculture, with 23 subsectors expanding. The PMI indicates that economic activity is not only sustained but also broadening, with output, new orders, employment, and raw material inventories all increasing.
Despite the economic expansion, household sentiment in Nigeria has deteriorated sharply. The Central Bank of Nigeria's (CBN) Inflation Expectations Survey revealed that 77.2% of households perceive inflation as high, a significant increase from 67.2% in August. Rural households and those earning below N70,000 are most affected, with 79.1% and 80% respectively reporting high inflation perceptions.
The pressure on households is reflected in their behavior, with overall consumer sentiment falling to -18.7 points in September from -9.9 points in August. Households are prioritizing essentials such as food, transport, education, electricity, and water. As a result, there are negative purchase intentions for major items like houses, motor vehicles, investments, and household appliances.
Businesses in Nigeria are also facing challenges, with multiple taxation, insecurity, and high interest rates ranking among their biggest constraints. The Business Expectations Survey placed multiple taxation at the top of firms' concerns at 67.1 index points, followed by insecurity at 66.2 points and high interest rates at 64.3 points.
Despite these challenges, the Business Confidence Index remains positive at 13.4 points, supported by increased demand, economic diversification, and access to finance. Industry confidence rose from 17.1 points in August to 19.4 points in September, although services and agriculture recorded declines.
The CBN surveys indicate that firms remain hopeful about future conditions, with business confidence projected to rise to 23.6 points in December 2026 and 36.1 points by March 2027. Respondents expect the naira to gain modestly against the dollar and borrowing costs to decline somewhat over the next six months.
However, the current challenges faced by households and businesses highlight the need for the economic expansion to translate into stronger household purchasing power and better business conditions. For now, the data point to an economy that is growing, but with households still holding back and firms navigating substantial costs and risks.
Key points
- 77.2% of Nigerian households perceive inflation as high.
- Economic activity in Nigeria has entered its fourth consecutive month of expansion.
- Businesses cite multiple taxation, insecurity, and high interest rates as major constraints.
