Private sector firms in Nigeria cut jobs in May 2025 for the first time in six months as businesses sought to rein in growing wage costs, according to the latest Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) report compiled by S&P Global.
The report highlighted a drop in workforce numbers, noting that “employment dipped for the first time in six months,” as firms cited difficulties in paying staff and increased voluntary resignations. This reduction helped slow the increase in wage bills.
“Staff costs were also up, but at the slowest pace since March 2023 as a reduction in employment acted to limit the rise in wage bills,” the report stated.
Shortages in labour contributed to rising backlogs of work for the second consecutive month, with the latest increase in outstanding business the sharpest since February 2023.
However, the report noted that delays in customer payments, not just staffing issues, were a key constraint in project completion.
The headline PMI dropped to 52.7 in May, down from 54.2 in April, marking the weakest improvement in private sector business conditions since January.
Although the index stayed above the 50.0 threshold for the sixth straight month, indicating expansion, the pace of growth slowed noticeably.
“Business conditions remain in the expansionary territory for the sixth consecutive month in May amid continued improvement in customer demand which is also ensuring businesses launch new products. However, the pace of improvement in business conditions slowed relative to April, pointing to the least marked improvement since January,” said Muyiwa Oni, Head of Equity Research, West Africa at Stanbic IBTC Bank.
Growth in both output and new orders softened in May, each rising at the slowest rate in four months, reflecting some moderation in market momentum.
“While new orders have now increased in each month since November 2024, some firms implied that market conditions are softening,” Oni said. “Hence, the pace of improvement in new orders during May eased to the weakest level in four months.”
Nonetheless, output continued to expand across all sectors, led by wholesale & retail and manufacturing.
Despite the slowdown, firms increased purchasing activity for the sixth consecutive month, and inventories rose at the fastest rate in three months as businesses looked to satisfy future demand.
While there was a marginal reprieve from April’s surge, inflationary pressures remained elevated. “Purchase costs rose rapidly amid higher raw material prices, currency weakness and increased transportation costs,” the report said.
Although staff costs also rose, the pace was slower due to the decline in employment. To cope, many firms passed these costs to customers, keeping output prices high, though the report noted the pace of inflation eased to a two-year low in May.
“Where companies charged lower prices, they indicated that it was due to the need to attract customers,” Oni added.
Supplier delivery times shortened again in May, helped by increased competition and prompt payments, but the improvement was the least marked in 2025 so far.
Supplier delivery times shortened again in May, helped by increased competition and prompt payments, but the improvement was the least marked in 2025 so far.
Business sentiment continued to weaken, declining for the fourth consecutive month and reaching one of the lowest levels on record. Still, most companies remained optimistic about output growth over the next 12 months, anchored on business expansion, marketing efforts, and restocking plans.
Stanbic IBTC forecasts that the Nigerian economy will grow by 3.5% year-on-year in 2025, up slightly from 3.4% in 2024, supported by expected lower interest rates and softer inflation.
“Nigeria’s business condition is on course to end Q2:25 on a positive momentum, albeit relatively weaker than witnessed in Q1:25,” Oni noted.
The PMI survey is based on responses from approximately 400 private-sector firms across agriculture, manufacturing, construction, wholesale, retail, and services.