Middle East Crisis: Nigerian Private Sector Growth Slows Amid Rising Fuel Costs

The Stanbic IBTC Purchasing Managers’ Index (PMI) report revealed that growth in the Nigerian private sector slowed at the end of the first quarter of the year, as higher fuel costs intensified inflationary pressures.

The headline PMI posted 51.9 in March, down from 53.2 in February but still above the 50.0 no-change mark, signalling an improvement in the health of the private sector during the month. Business conditions have strengthened in 15 of the past 16 months.

The report said that “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.”

It noted that “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.”

According to the report, activity increased in agriculture and wholesale & retail, but decreased in manufacturing and services.

“The aforementioned rise in fuel costs had a stark impact on rates of inflation in the Nigerian private sector during March. Purchase costs increased at the fastest pace in 15 months, while selling prices were also raised to the largest extent since December 2024 in response. Selling price inflation accelerated sharply across all four monitored sectors.

“Employment increased for the tenth month running, albeit slightly and at a slower pace than in February. Meanwhile, the rate of staff cost inflation also eased and was at a fourmonth low.”

It added that “the need to respond to rising new orders and expected increases in workloads in the coming months encouraged companies to expand their purchasing activity and stocks of inputs in March. The rise in input buying was marked, but inventory accumulation was only modest.”

The report stated further”companies remained optimistic that output will increase over the coming year, with confidence reflecting plans to invest in business expansions and boost promotional efforts.”

Speaking, the head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “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 future output increases amid plans to expand operations and boost promotional efforts. Nonetheless, input prices rose markedly at the sharpest pace since January 2025, with all four monitored sectors recording similarly sharp rates of inflation. ”

Oni disclosed that 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 pointed out that the government’s infrastructure drive should continue to support the attractiveness of the construction, real estate, and cement sectors.

He, however, stated that the ongoing tensions in the Middle East pose a downside risk to the growth outlook, as higher inflation stemming from sustained increases in fuel prices may lead to higher-for-longer interest rates, which could slow demand should the tensions continue to escalate.