The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) for December 2025 registered 53.60, down from 54.00 in November and below the consensus estimate of 54.40, according to the Sigmanomics database. This reading marks a slight moderation in manufacturing growth but remains comfortably above the 50-point threshold that separates expansion from contraction. Over the past 12 months, the PMI has averaged 53.90, reflecting steady but uneven industrial activity.

Drivers this month

• Output growth slowed marginally, contributing -0.30 points to the PMI decline.
• New orders remained robust but softened compared to last month.
• Input cost inflation persisted, pressuring margins and dampening expansion.
• Employment levels showed modest gains, supporting production capacity.

Policy pulse

The PMI reading sits below the central bank’s inflation target corridor, signaling cooling momentum amid ongoing monetary tightening. The Central Bank of Nigeria (CBN) has maintained a restrictive stance, with the Monetary Policy Rate (MPR) steady at 18.50% to combat inflation near 22%. This environment constrains credit growth and investment, weighing on manufacturing expansion.

Market lens

Immediate reaction: The Nigerian Naira (NGN/USD) depreciated 0.40% within the first hour post-release, reflecting investor caution. Short-term government bond yields edged higher by 10 basis points, while the NGX Industrial Index showed a mild 0.20% decline, mirroring tempered industrial sentiment.

Core macroeconomic indicators provide essential context for interpreting the PMI’s trajectory. Nigeria’s GDP growth for Q3 2025 was revised to 2.30% year-on-year, down from 2.70% in Q2, reflecting weaker industrial output and subdued consumer demand. Inflation remains elevated at 21.80% YoY, driven by food and energy prices. The unemployment rate stands at 13.50%, with youth unemployment notably higher.

Monetary Policy & Financial Conditions

The CBN’s tight monetary stance aims to anchor inflation expectations but restricts liquidity. Credit to the private sector grew by only 3.10% YoY in November, limiting manufacturing investment. The real effective exchange rate depreciated by 6% over the past year, increasing import costs for manufacturers reliant on foreign inputs.

Fiscal Policy & Government Budget

Fiscal consolidation efforts continue, with the 2025 budget deficit targeted at 3.50% of GDP, down from 4.20% in 2024. However, delayed revenue inflows and rising debt service costs constrain public spending on infrastructure and industrial incentives, indirectly impacting manufacturing growth.

External Shocks & Geopolitical Risks

Global commodity price volatility, particularly in oil and metals, affects Nigeria’s export revenues and foreign exchange reserves. Regional security challenges and geopolitical tensions in West Africa add uncertainty to supply chains and investor confidence.

Drivers this month

• New orders index declined from 55.10 to 54.00 MoM.
• Input prices index remained elevated at 68.50, unchanged from November.
• Employment index rose slightly from 51.20 to 51.80, supporting capacity.

Policy pulse

The PMI’s moderation aligns with the CBN’s restrictive monetary policy, which has kept borrowing costs high. The manufacturing sector’s sensitivity to interest rates and exchange rate volatility explains the cautious expansion pace.

Market lens

Immediate reaction: The NGX Industrial Index dipped 0.20% post-release, reflecting investor concerns over slowing industrial growth. The NGN/USD spot rate weakened slightly, while 2-year government bond yields rose by 10 basis points, signaling risk repricing.

Looking ahead, the Nigerian manufacturing sector faces a complex mix of opportunities and risks. The PMI’s current level suggests continued expansion but at a slower pace. Three scenarios frame the outlook:

Bullish scenario (30% probability)

• Inflation moderates below 15% by mid-2026, easing monetary policy.
• Improved foreign exchange stability reduces input costs.
• Government accelerates infrastructure spending and industrial reforms.
• PMI rises above 55, signaling robust manufacturing growth.

Base scenario (50% probability)

• Inflation remains sticky around 18-20%, limiting policy easing.
• Exchange rate volatility persists, constraining import-dependent sectors.
• Fiscal consolidation continues, with moderate public investment.
• PMI stabilizes near current levels (53.50-54.00), reflecting steady but cautious growth.

Bearish scenario (20% probability)

• External shocks (commodity price shocks, geopolitical tensions) worsen.
• Inflation spikes above 25%, forcing aggressive monetary tightening.
• Fiscal slippage increases debt risks, crowding out private investment.
• PMI falls below 50, indicating contraction in manufacturing activity.

Policy pulse

Monetary policy will remain a key determinant. The CBN’s ability to balance inflation control with growth support is critical. Fiscal policy flexibility and external environment stabilization will also influence the manufacturing outlook.

Market lens

Financial markets will closely watch inflation data, CBN communications, and FX reserves. The NGX Industrial Index and NGN/USD exchange rate will serve as barometers for investor sentiment on Nigeria’s industrial prospects.

The December 2025 Stanbic IBTC Bank Nigeria PMI reading of 53.60 signals ongoing manufacturing expansion but at a moderated pace. Persistent inflation, tight monetary policy, and external uncertainties temper optimism. Structural challenges such as infrastructure deficits and fiscal constraints remain headwinds. However, the sector’s resilience and modest employment gains provide a foundation for cautious optimism.

Policymakers and investors should monitor inflation trends, exchange rate stability, and fiscal developments closely. The balance of risks suggests a steady but fragile recovery path. Strategic reforms and external environment improvements could unlock stronger growth, while adverse shocks may trigger contraction.