Nigeria's economic activity strengthened marginally in October, extending the country's expansion for a fifth consecutive month. The Central Bank of Nigeria's October Purchasing Managers' Index (PMI) report showed that the composite PMI increased to 53.2 points from 53.0 points in September. This indicates continued expansion in private-sector business activity. However, the improvement came alongside an increase in business costs, with the composite input price index rising to 64.0 points.
The rising cost pressures could further complicate efforts to translate economic expansion into improved consumer welfare. Businesses are recording increased activity, but the cost of acquiring the inputs needed to sustain production and service delivery remains elevated. The October report also revealed that the recovery remains uneven across the economy, despite improvements in the overall business environment. Of the 32 subsectors covered by the CBN survey, 24 recorded expansions, while eight remained in contraction territory.
Several key sectors experienced contraction, including chemical and pharmaceutical products, transportation, courier and storage, telecommunications and information services, and real estate. Textile, apparel and footwear also remained in contraction. The performance of these sectors raises questions about the structural challenges confronting businesses, including operating expenses, infrastructure constraints, financing conditions, and the strength of consumer demand.
Agriculture emerged as the strongest-performing sector, with its PMI rising to 54.7 points in October from 53.1 points in September. All five agricultural subsectors recorded expansion, indicating an improvement in business activity across the sector. However, the agricultural input price index stood at 68.3 points, while the output price index reached 61.1 points, reflecting continued cost and pricing pressures within the sector.
The industrial sector also showed improvement, with the PMI increasing to 52.6 points from 52.0 points. The services sector slowed slightly to 52.7 points from 53.2 points, although both remained in expansion territory. The manufacturing subsector data revealed significant differences in performance across industries, with cement, motor vehicles and assembly, oil refining, and wood products recording improvements.
The services sector presented a mixed picture, with finance and insurance recording a PMI of 57.1 points, while educational services reached 60.2 points. In contrast, transportation and telecommunications remained in contraction. The composite output index stood at 54.6 points, above the new orders index of 52.8 points, while the employment index reached 53.2 points.
Overall, the October PMI report points to an economy maintaining its expansionary momentum but still facing significant cost pressures and uneven sectoral recovery. Policymakers must address the cost of production, improve the business environment, and ensure that economic expansion translates into stronger productive activity across more sectors. The strength of Nigeria's recovery will depend on whether businesses can sustain production, manage operating costs, and create an environment in which consumers and businesses can benefit from improved economic activity.
Key points
- Nigeria's economy grew for the fifth consecutive month in October, but rising business costs and uneven sectoral performance raise concerns about the sustainability of the recovery.
