Market News

BY Hope Moses-Ashike 

Nigeria’s Purchasing Managers Index (PMI) recorded expansion for the third consecutive month, in March 2025, following naira stability and reduction in energy prices.

Data from the Central Bank of Nigeria (CBN) revealed that the PMI for March 2025 stands at 52.3 points from 51.4 points in February 2025, indicating expansion in economic activities.

Ayodeji Ebo, an investment professional and managing director/CBO at Optimus by Afrinvest, said, “This may be attributed to relative stability in the exchange rate and the reduction in energy prices.”

The industry sector recorded an expansion to 51.5 points, the third consecutive increase. Similarly, the services sector showed expansion with a score of 51.5 points during the review month. The agriculture sector continued its growth, achieving 54.7 points for its eighth consecutive month of expansion in March 2025.

A detailed analysis of the 36 subsectors across the industry, services, and agriculture sectors revealed that 24 subsectors reported growth in economic activities, with forestry displaying the highest level of growth during this period. Conversely, 12 subsectors experienced a decline, with non-metallic mineral products reporting the most significant downturn.

The CBN also released its Business Expectation Survey reports showing that companies are optimistic about the economy. This optimism comes partly from expectations about the exchange rate. The Confidence Index (CI) for respondent firms is 31.7 in March 2025, 39.0 in April 2025, 45.1 in June 2025, and 48.3 in September 2025.

“This indicates a positive outlook for the economy moving forward. However, concerns about the global trade war could limit this optimism,” Ebo said.

In March 2025, all sectors expressed positive feelings about the economy, with the agriculture sector showing the strongest confidence and planning significant expansion for April 2025. Firms expect the Naira to become stronger in the coming months.

Respondents identified high interest rates, insufficient power supply, high taxes, insecurity, financial issues, and high bank charges as major challenges in March 2025. The agriculture sector had the highest capacity utilisation during that month. All three main sectors anticipated good business activity in April, June, and September 2025. Firms are also hopeful about job growth and expansion during this period. They expect the Naira to appreciate against the US Dollar and foresee an increase in borrowing rates as well.

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The CBN also released Inflation Expectations Survey report, which showed that in March 2025, more respondents perceived inflation to be slowing down, as small businesses mainly believed the inflation rate was decreasing.

Respondents, including both businesses and households, believe that energy costs (like PMS, diesel, and electricity), transportation costs, the exchange rate, and interest rates affect their views on inflation this month. Nearly half (49%) of respondents expect inflation to stay stable for the next month and the following three months.

More households expect their spending to remain stable in the current month than businesses do. Both households and businesses think their spending will stabilise over the next six months. About 69.7 percent of respondents want the CBN to lower interest rates.

However, The National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for March 2025, showing a reversal in the downward inflation trend observed in recent months.

According to analysts at Comercio Partners, the rise in headline inflation was largely driven by an uptick in core inflation, which rose to 24.43 percent from 23.01 percent in the previous month. The increase suggests growing price pressures in non-food categories, particularly housing, utilities, and other essential services. This increase signals underlying price pressures beyond the volatile components such as the cost of services.

In addition to domestic factors, global dynamics are adding another layer of complexity to Nigeria’s inflation picture. A significant external shock came in the form of a 14 percent tariff imposed by the U.S. on Nigerian exports.

“This will likely raise the cost of Nigerian exports, especially non-oil commodities, and reduce the country’s trade competitiveness. As Nigerian producers face higher tariffs on their exports, this could result in lower export earnings and weaker trade terms, which, in turn, would put additional pressure on Nigeria’s current account and further strain the naira,” analysts at Comercio Partners said.

According to Ebo, the March 2025 PMI, businessexpectation, and inflation expectation reports underscore Nigeria’s ongoing economic recovery. Exchange rate stability and moderating inflation perceptions fuel expanding sectors and optimistic business outlooks.

“Despite challenges like high interest rates and insecurity, these insights empower the CBN to fine-tune monetary policies for sustainable growth. Focusing on addressing business constraints and stabilising prices will be critical to maintaining this positive trajectory,” he said.