By Simpson Global Media News Desk
Nigeria’s private sector ended the third quarter of 2026 with its strongest expansion in more than four years, as stronger customer demand and a sustained increase in new orders lifted output, purchasing activity and employment across the economy.
The latest Stanbic IBTC Purchasing Managers’ Index, compiled by S&P Global, rose to 56.4 points in September from 54.3 in August. The September reading was the highest since February 2022, when the index stood at 57.3 points. A PMI reading above 50 indicates an expansion in private-sector activity, while a reading below 50 signals contraction.
The improvement presents a more positive picture of Nigeria’s business environment than the difficult operating conditions frequently reported by companies. It also comes alongside a separate Central Bank of Nigeria survey showing that businesses remain concerned about multiple taxation, insecurity and high interest rates.
The two sets of findings point to a business environment with a striking contradiction: companies are seeing stronger demand and expanding activity, but many are still operating under substantial cost and financing pressures.
For policymakers, the challenge will be to ensure that the current expansion develops into sustained investment, productivity and job creation rather than being constrained by the high cost of doing business.
Strongest expansion since early 2022
The September PMI performance was significant because the improvement was broad rather than being driven by a single industry.
The survey covered agriculture, manufacturing, wholesale and retail, and services. All four sectors recorded growth in output during September, according to the latest analysis of the survey.
New business increased for an eighth consecutive month, with the pace of expansion accelerating to its fastest level since February 2022. Companies attributed the stronger flow of orders primarily to improving customer demand and the introduction of new products.
The increase in new orders then fed into production and service activity.
Output expanded at its fastest rate in more than four years, while companies increased their purchasing activity as they sought to meet heavier workloads and prepare for continued demand.
The result was a stronger end to the third quarter.
Muyiwa Oni, head of equity research for West Africa at Stanbic IBTC Bank, described the September performance as a significant improvement in overall business conditions and said the latest PMI pointed to a better third quarter for business activity compared with the second quarter.
The data therefore provide evidence that demand within the Nigerian economy is recovering or strengthening in several parts of the private sector.
That does not necessarily mean every company is profitable or that households are experiencing an equivalent improvement in purchasing power.
A PMI measures changes in business activity rather than household welfare or corporate profitability.
Nevertheless, sustained growth in new orders and output is important because businesses generally need rising demand before they can justify increasing production, purchasing equipment, expanding premises or hiring additional workers.
Demand becomes the main growth engine
One of the strongest signals in the September survey was the continued increase in new orders.
New business rose for the eighth straight month, and the rate of growth accelerated substantially.
For companies, this matters because new orders are a leading indicator of future production requirements.
A manufacturer receiving more orders may need to purchase additional raw materials.
A retailer experiencing higher demand may replenish inventory more frequently.
A service provider may need additional employees or equipment to accommodate more customers.
The September survey indicated that this process was already taking place.
Companies increased purchasing activity, while inventory accumulation reached its strongest level since the end of 2021.
Some businesses were purchasing inputs not only to meet immediate orders but also in anticipation of further improvements in demand.
That behaviour suggests that at least some firms have become sufficiently confident about their sales outlook to increase stock levels.
However, inventory building also carries risk.
If demand weakens unexpectedly, companies can be left holding expensive stock.
That is particularly important in an economy where financing costs remain high and where working capital can be costly.
For Nigerian companies, the ability to balance stronger demand with prudent inventory management will therefore be important during the final quarter of the year.
Employment is improving, but cautiously
The stronger level of business activity also supported job creation.
The September PMI showed that employment increased, although the pace of hiring remained modest.
A significant portion of the additional recruitment involved temporary workers brought in to handle specific projects and heavier workloads.
That distinction is important.
An increase in employment can indicate that companies are responding to sustained demand, but temporary recruitment does not necessarily represent the same level of long-term confidence as permanent expansion.
Businesses facing uncertain costs may prefer flexible labour arrangements until they have greater certainty about future sales.
For workers, however, even temporary opportunities can provide additional income and experience.
For the wider economy, sustained private-sector growth would be more significant if it gradually translated into permanent employment, higher productivity and investment in skills.
Nigeria needs millions of productive jobs over the long term, particularly for its young and expanding population.
The current PMI improvement therefore provides an encouraging signal, but the quality and durability of the jobs generated will matter as much as the headline employment figure.
Cost pressures have not disappeared
The strongest warning contained in the latest business data is that stronger activity is occurring alongside persistent cost pressures.
The PMI showed input prices rising sharply in September.
Companies reported higher costs for fuel, transportation, raw materials, food products and animal feed.
Staff costs also increased as companies adjusted salaries and provided incentives to workers involved in projects.
Businesses passed some of those higher costs on to customers.
Output-price inflation consequently reached a three-month high, with selling prices increasing at their fastest rate since June.
This creates a difficult balancing act.
When businesses raise prices, they protect margins against rising costs, but they can also reduce demand if customers become unable or unwilling to pay more.
When businesses absorb higher costs instead, their profit margins can shrink.
Either outcome can constrain investment.
The challenge becomes especially serious for small and medium-sized enterprises, which often have less access to cheap finance and fewer opportunities to spread fixed costs across large production volumes.
The September PMI therefore should not be interpreted as evidence that Nigeria's cost-of-doing-business problem has been resolved.
Instead, it indicates that businesses are currently managing to expand despite those pressures.
Taxation remains a major concern
The Central Bank of Nigeria's September Business Expectations Survey provides an important counterweight to the positive PMI figures.
The CBN found that high or multiple taxation was the leading constraint reported by businesses during the month, recording a constraint index of 67.1 points.
Insecurity followed at 66.2 points, while high interest rates recorded 64.3 points.
Other concerns included an unfavourable political climate, high bank charges, competition, unclear economic laws and an unfavourable economic climate.
The findings show that stronger demand does not automatically eliminate structural problems affecting businesses.
A company may be receiving more orders while simultaneously spending more on taxes, financing, transportation, security and other operating expenses.
That can limit the amount of additional revenue that becomes actual profit.
It can also affect investment decisions.
A business owner deciding whether to open another branch, purchase machinery or employ additional workers will consider not only expected sales but also the cost and predictability of operating expenses.
When those costs remain uncertain, expansion decisions may be delayed even when demand is improving.
Business confidence remains positive
Despite the constraints, the CBN's Business Confidence Index remained positive at 13.4 points in September.
That was down from 14.8 points in August, but it still indicated that businesses generally maintained a positive outlook.
The CBN survey found that increased demand, economic diversification and access to finance were among the factors supporting positive business sentiment.
Firms also expected business confidence to strengthen in subsequent months.
The expectation is important because confidence influences investment.
Businesses are more likely to commit capital when they believe future demand will remain strong and macroeconomic conditions will become more predictable.
According to reporting on the CBN survey, the overall confidence index was expected to rise to 23.6 points in October and continue strengthening into later review periods.
The gap between present confidence and expected future confidence suggests that companies are not simply reacting to current demand.
Some are also anticipating better conditions ahead.
Monetary policy and the cost of borrowing
Financing remains one of the most important issues facing Nigerian businesses.
The CBN reduced the Monetary Policy Rate to 23 per cent at its September 21–22, 2026 Monetary Policy Committee meeting, down from the 26.5 per cent level retained at the July meeting.
The September decision represented a significant shift in monetary conditions.
However, a lower policy rate does not immediately translate into cheap credit for every company.
Banks consider their own funding costs, credit risks, liquidity conditions and the risk profile of individual borrowers when determining lending rates.
The CBN's September business survey showed that companies still expected borrowing rates to remain elevated across the review periods, although they anticipated some moderation over the following six months.
This is particularly important for businesses that rely heavily on bank credit for working capital.
A company may have growing orders but still struggle to finance the raw materials needed to fulfil them if borrowing costs are too high.
For smaller businesses, the problem can be even more pronounced.
Access to affordable working capital can determine whether a company accepts a large order, purchases inventory in advance or turns down an opportunity because it cannot finance the transaction.
Inflation is moderating
Another factor supporting the improved business environment is the moderation of inflation.
Nigeria's headline inflation rate slowed marginally to 15.39 per cent in August from 15.43 per cent in July, according to figures reflected in the CBN's current economic indicators.
The moderation is important because inflation affects virtually every business decision.
When prices rise rapidly, companies have difficulty forecasting costs and setting prices.
Customers also face pressure on their purchasing power.
A slowdown in inflation does not mean prices are falling.
It means the rate at which prices are increasing has moderated.
That distinction is important for businesses and consumers.
If inflation continues to slow while incomes and productivity improve, companies may eventually operate in a more predictable pricing environment.
But if input costs continue rising sharply in particular sectors, individual businesses may still face significant pressure despite the broader moderation in headline inflation.
Fuel and transportation remain critical
Fuel and transportation costs continue to influence Nigerian business conditions.
The September PMI identified higher fuel and transport expenses as important contributors to the increase in input prices.
This matters because transportation is embedded in almost every commercial transaction.
Agricultural products must move from farms to aggregation centres.
Manufacturers must bring raw materials into factories and distribute finished goods.
Retailers must move inventory to shops.
Service businesses require workers and customers to travel.
Higher transport costs can therefore spread through the entire economy.
The impact is particularly strong in sectors where margins are relatively narrow.
A small retailer may not be able to absorb a significant increase in transportation costs without raising prices.
A manufacturer may face higher logistics expenses even when the cost of its raw materials remains stable.
An online business may have to adjust delivery charges.
The September PMI's combination of stronger demand and higher transport costs therefore captures two opposing forces shaping Nigerian commerce.
The informal economy remains important
The private-sector expansion measured by business surveys also needs to be understood in the context of Nigeria's large informal economy.
Millions of Nigerians operate small shops, workshops, farms, transport businesses, food outlets, trading operations and other enterprises outside the formal corporate sector.
Some of these businesses may not be directly represented in formal economic surveys to the same extent as registered companies.
Nevertheless, they are deeply connected to demand.
When consumers have more money to spend, informal retailers can experience stronger sales.
When transportation costs rise, informal businesses face higher expenses.
When security conditions deteriorate, traders and small manufacturers can lose access to customers or operating locations.
The broader business environment therefore extends well beyond listed companies and large corporations.
For economic growth to become more inclusive, improved business conditions need to reach smaller enterprises as well.
Why the PMI matters for manufacturers
Manufacturing is particularly sensitive to the interaction between demand and costs.
A manufacturer benefits from stronger orders because higher capacity utilisation can improve efficiency.
Fixed costs such as rent, machinery and administrative expenses can be spread across a larger volume of output.
But manufacturers are also highly exposed to energy, transportation, imported inputs, exchange-rate movements and financing costs.
The September PMI showed that stronger demand was encouraging businesses to increase purchasing activity.
If that momentum persists, manufacturers could benefit from greater capacity utilisation and stronger sales.
However, sustained investment will depend on whether companies can achieve sufficient returns after accounting for input costs and financing expenses.
For Nigeria's industrialisation ambitions, this distinction is crucial.
Temporary increases in output are positive, but long-term industrial development requires businesses to invest in machinery, technology, skills and productive capacity.
Retail and consumer demand
Wholesale and retail businesses are another major part of the current expansion.
Higher new orders suggest that consumers and other businesses are purchasing more goods.
However, consumer demand is closely linked to real purchasing power.
When inflation slows, households may gain some relief because the pace of price increases becomes less severe.
But the level of prices accumulated during previous periods of high inflation remains part of the household budget.
Consumers may therefore continue to prioritise essential goods and services even while overall demand improves.
Businesses have to respond to this changing consumer behaviour.
Companies introducing new products may be attempting to capture customers who are looking for cheaper alternatives, improved value or products that better fit changing spending patterns.
The PMI's reference to new products as one of the drivers of new business therefore highlights the importance of innovation in a competitive market.
Services sector and the changing economy
Services are also playing an increasingly important role in Nigeria's economic structure.
Banking, telecommunications, professional services, logistics, technology, education, healthcare, entertainment and hospitality all contribute to private-sector activity.
Many service businesses can scale faster than traditional industries when demand rises.
Digital businesses, for example, can expand customer numbers without requiring the same level of physical infrastructure as a factory.
But services are not immune to operating costs.
Businesses still require electricity, connectivity, premises, skilled employees and financing.
They also face taxation, regulatory requirements and security concerns.
The September expansion across the services sector therefore reflects improving demand but does not eliminate the structural issues confronting businesses.
Agriculture's place in the private-sector expansion
Agriculture also recorded growth within the sectors monitored by the PMI.
That is important because agriculture remains one of the largest sources of employment and household income in Nigeria.
But the sector faces distinctive challenges, including weather risks, insecurity, input costs, storage limitations and transportation difficulties.
Stronger agricultural business activity can benefit manufacturers and retailers by increasing supplies of raw materials and food products.
It can also support rural incomes and create demand for machinery, logistics and financial services.
However, the benefits are maximised when agricultural production is connected to processing and markets.
A rise in farm output without adequate storage or processing capacity can result in losses or weak farm-gate prices.
The stronger private-sector PMI therefore reinforces the importance of policies that connect sectors rather than treating each one independently.
Nigeria's position among African economies
BusinessDay's analysis of PMI reports from eight major African economies showed Nigeria recorded the strongest private-sector business activity among the countries tracked in September.
Nigeria's 56.4 reading placed it ahead of Uganda, which had held the strongest position in August.
Nigeria last occupied the top position in the comparison in October 2025.
The comparison is useful because businesses operate in an increasingly competitive African market.
Countries are competing for investment, manufacturing projects, technology companies, export contracts and regional headquarters.
A stronger PMI can therefore improve perceptions of Nigeria's commercial momentum.
However, investors will look beyond a single monthly indicator.
They will consider taxation, infrastructure, currency stability, security, access to finance, energy supply, regulatory consistency and the size of the consumer market.
Nigeria's large population and market remain major advantages, but investors need confidence that businesses can operate predictably.
Growth expectations
The stronger September performance has led some analysts to raise their expectations for economic growth.
Stanbic IBTC's Muyiwa Oni said the latest business activity was consistent with an estimated 4.56 per cent year-on-year GDP growth in the third quarter and projected full-year 2026 growth of about 4.4 per cent, compared with 3.87 per cent in 2025.
Such estimates remain forecasts rather than confirmed official GDP results.
Nevertheless, they illustrate how stronger private-sector activity can influence expectations for the wider economy.
If businesses continue receiving more orders, increasing production and hiring workers, the improvement should eventually be reflected in official economic output data.
The key question is whether September's momentum continues through the final quarter and into 2027.
What could threaten the recovery?
Several risks remain.
The first is the persistence of high operating costs.
If fuel, transport, raw materials and labour costs continue increasing rapidly, businesses may have to raise prices or accept lower margins.
The second is financing.
Even with the CBN's reduction in the policy rate, businesses continue to regard high interest rates as a major constraint.
The third is taxation.
The CBN survey's ranking of multiple taxation as the leading constraint shows that companies remain concerned about the cumulative burden of taxes and levies.
Nigeria has undertaken tax reforms intended to simplify the system and improve revenue collection, but businesses will judge the reforms by their practical effect on compliance costs and predictability.
Security is another major concern.
The CBN survey placed insecurity second among the constraints reported by businesses.
Security problems can interrupt transportation, reduce operating hours, increase insurance and protection costs and discourage investment in affected locations.
These risks could weaken the current expansion if they are not addressed.
The opportunity for investment
The positive business data also create an opportunity.
Companies experiencing stronger demand may become more willing to invest in additional capacity.
Banks and other financial institutions may see stronger demand for productive credit if businesses become more confident about future sales.
Domestic and international investors may view stronger private-sector activity as evidence that Nigeria's economic reforms are beginning to generate improved commercial conditions.
But investment depends heavily on confidence in the future.
Businesses need to believe that tax rules will remain predictable, financing conditions will not become excessively restrictive, infrastructure will improve and security risks will remain manageable.
Consistency is therefore likely to be as important as any individual policy announcement.
What happens next
The next several months will provide an important test of whether September's strong PMI reading represents the beginning of a sustained acceleration or a temporary improvement in business activity.
The October PMI will be particularly important.
If new orders, output and employment continue rising, it would provide stronger evidence that the private sector is entering a more durable expansion.
If the figures weaken sharply, analysts may conclude that September's improvement reflected temporary demand factors.
Businesses themselves will also be watching costs.
The combination of stronger demand and rising input prices means companies must determine whether they can expand without allowing costs to erode profitability.
The CBN's monetary-policy direction will remain another major factor.
A continued reduction in inflation and gradual easing of monetary conditions could improve access to credit over time.
But policymakers will need to balance support for economic activity with the need to preserve price and financial stability.
A recovery that still needs structural support
Nigeria's latest business figures offer a reason for cautious optimism.
A PMI of 56.4 is not simply a marginal improvement over August's 54.3.
It represents the strongest reading since February 2022 and reflects accelerating new orders, output and purchasing activity across the sectors covered by the survey.
The improvement is particularly significant because it has occurred alongside major challenges.
Businesses continue to report taxation, insecurity and interest rates as serious constraints.
Input prices are rising.
Transport and fuel costs remain significant.
Employment growth is still relatively modest.
Financing remains expensive.
These realities mean the current expansion should be viewed as an opportunity rather than a guarantee.
If policymakers can reduce unnecessary business costs, improve security, deepen access to productive finance and maintain a more predictable regulatory environment, stronger demand could translate into greater investment.
If companies can use the current improvement to increase productivity, develop new products, expand capacity and create more permanent jobs, the benefits could extend well beyond the businesses represented in the PMI survey.
From stronger demand to stronger businesses
The most important question for Nigeria's private sector is not simply whether companies are selling more today.
It is whether they can use the improvement to become stronger tomorrow.
A sustainable business expansion should eventually produce higher investment, better jobs, stronger domestic supply chains and increased productivity.
Manufacturers should be able to expand capacity.
Retailers should be able to replenish stock at competitive prices.
Agricultural businesses should be able to connect farmers to reliable markets.
Service companies should be able to invest in technology and skills.
Small businesses should be able to access finance without being overwhelmed by interest charges.
And investors should be able to operate with confidence that the rules of the market are transparent and predictable.
The September figures suggest that demand is providing part of that foundation.
The policy environment will determine how much of the opportunity can be converted into lasting economic gains.
Nigeria's private sector has therefore entered the final quarter of 2026 with stronger momentum than it had earlier in the year.
The challenge now is to protect that momentum.
The latest PMI shows that customers are ordering more, companies are producing more and businesses are increasing purchasing activity.
The CBN survey shows, however, that firms still want relief from the structural pressures that raise their costs.
The two findings are not contradictory.
They describe an economy in transition: demand is improving, confidence remains positive and private-sector activity is expanding, but businesses are still carrying significant costs and risks.
If those constraints can be gradually reduced, the current four-year-high level of business activity could become more than a temporary statistical milestone.
It could become the foundation for a broader period of investment, employment and private-sector expansion in Nigeria.
For now, the September numbers offer a cautiously positive signal: Nigerian businesses are moving faster, but the durability of that momentum will depend on whether the wider operating environment becomes easier, more predictable and more supportive of productive enterprise.
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