August 11, 2026/Cordros Report
Nigeria’s composite Purchasing Managers Index (PMI) extended its recovery in July 2026, edging higher to 51.1 points from 50.1 in June and marking its second consecutive month of expansion. This rise is broader than the headline suggests, although the recovery remains uneven. Services returned to expansion territory at 51.1 points (June: 49.4 points) after three months of contraction, while agriculture held its ground at 52.1 points. Industry alone remained below the threshold at 49.6 points (June: 49.5 points). Notably, two of the three main sectors are now expanding, up from one in June, indicating a broader-based recovery in July. At the component level, output (51.8 | June: 50.5 points), new orders (50.8 | June: 49.0 points) and employment (51.1 | June: 51.0 points) recorded expansion. Meanwhile, the input-price index eased further to 62.7 (June: 64.3), reflecting moderating price pressures. The key difference between the July and June readings was new orders, which crossed into expansion (50.8 | June: 49.0) for the first time since March 2026. Overall, we maintain our Q2-26 GDP growth forecast at 4.20% y/y and expect the composite PMI to hold above 50.0 points in August. However, this outlook is conditional on new orders remaining in expansion and the absence of a renewed spike in input costs.
According to the just-released data from the Central Bank of Nigeria (CBN), Nigeria’s composite PMI printed 51.1 points in July, building on the expansion recorded in June (50.1 points). We note that the recovery was led by two of the three main sectors – services (51.1 | June: 49.4 points), which returned to expansion, and agriculture, held at 52.1 points, while industry (49.6 | June: 49.5 points) remained the sole laggard. The breadth of the recovery also improved as 20 of the 32 subsectors expanded, up from 19 subsectors in June. This suggests that the pickup was not concentrated in a handful of large sectors.
The recovery is becoming increasingly demand-led. Employment and output remained in expansion, while demand firmed as new orders recovered into expansion territory. This is the first time all three components have aligned since March 2026.
Broader Recovery Yet Still One Gap
The July PMI points to a more resilient economy than the June reading. The expansion is broad-based rather than concentrated in a few sectors. Beyond the composite reading, a closer look at each sector and its subsectors reveals where the economy’s momentum is building and where activity continues to lag.
Agriculture: Agricultural activity held steady, with the PMI unchanged at 52.1 points in July and remaining in expansion for the twenty-fourth consecutive month. This primarily reflects gains in general farming activities (54.4 | June: 53.9 points) and new orders (52.8 | June: 50.7 points), buoyed by the rainy season, which offset softer employment (50.9 | June: 53.7 points). Disaggregating the data, four out of the five subsectors expanded, led by agriculture support services (55.8 | June: 50.3 points), fishing (52.6 | June: 50.9 points), and livestock (52.4 | June: 52.3 points). Forestry normalised sharply from June’s spike (53.6 | June: 78.1 points) but remained in expansion, while crop production (49.4 | June: 51.3 points) slipped into contraction. In our view, the dip in crop production reflects the seasonal lull between planting and harvesting rather than softer demand. We expect agriculture to hold in expansion through August 2026 on continued rainy-season support, provided rainfall stays near the long-term average. An early dry spell or flooding that disrupts the crop cycle is the main risk.
Industry: Activity in the sector remained in contraction for the fourth consecutive month, marginally improving to 49.6 points from 49.5 in June. The near-flat headline masks large offsetting moves. Sharp gains in electrical and electronics (61.6 | June: 42.5 points), metals (47.6 | June: 35.4 points), wood (50.6 | June: 43.3 points), and pulp & paper products (52.7 | June: 43.1 points) were almost entirely offset by the collapse in oil refining at 40.0 (June: 55.6 points). This was the steepest subsector decline in the month, which we attribute to input-supply constraints and operational challenges faced by local refiners. Food, beverage & tobacco (47.4 | June: 52.8 points) and cement (45.7 | June: 47.5 points) also softened. The lingering effects of the Middle East conflict continued to weigh on energy prices and, in turn, logistics and operational costs. Overall, industrial activity remained constrained by elevated energy and input costs. At the component level, employment (50.5 | June: 51.1 points) and suppliers’ delivery time (51.3 | June: 50.9 points) remained in expansion, while new orders (48.9 | June: 48.1 points) improved but in contraction. We expect the industry to remain in contraction in August unless oil refining recovers. In our view, further easing in energy and input costs is necessary for a recovery into expansion territory. Renewed supply pressure from the Middle East, however, could delay the recovery.
Services: In contrast to industry, services returned to expansion in July, with the PMI rising to 51.1 (June: 49.4 points) after three consecutive months of contraction. Across the components, new orders (50.9 | June: 48.7 points), employment (51.4 | June: 49.8 points) and output (52.1 | June: 49.8 points) all moved into expansionary territory. A disaggregation of the sector data reveals that 8 out of the 11 subsectors expanded, led by real estate (53.4 | June: 48.8 points), human health & social services (53.7 | June: 51.5 points), and trade (51.3 | June: 47.1 points). Motion pictures remained in expansion but eased to 55.1 points from 56.3 in June. On the other hand, the transportation (47.5 | June: 37.9 points), accommodation & food services (47.6 | June: 45.0 points), and publishing (47.8 | June: 55.6 points) subsectors remained in contraction. With new orders, employment and output now aligned in expansion, we expect services to hold above 50 in August, provided demand stays firm. The main risk is that a renewed pickup in inflation will squeeze discretionary spending — particularly in transport and hospitality.
Key Issues from the July Report
The Recovery is Broadening: The recovery in July was broader than in June, with 20 of 32 subsectors recording expansion. At the same time, the agriculture and services sectors were expanding, while the industry sector remained in contraction. In June, only the agriculture sector was in expansion.
Demand is Strengthening: Composite new orders printed 50.8 points, up from 49.0 points in June, moving into expansion for the first time since March. Output and employment were already expanding in June. In July, new orders moved into the expansion territory, indicating that the recovery is becoming more demand-supported.
Price pressures are beginning to soften: The composite input price index declined to 62.7 (June: 64.3), while the output price index fell to 57.9 (June: 60.9). Output prices, therefore, declined faster than input (−3.0 vs −1.6 points). This is an early sign that firms may be absorbing less cost pressure into margins. While both indices remain above the 50-point threshold, their continued moderation points to a more favourable trajectory. More importantly, the gap between input and output price pressures narrowed, suggesting that cost pressures are easing.
The Macroeconomic Signal: A Broader Recovery to Follow in Q3-26
We combine the July 2026 PMI reading with key macroeconomic variables — real GDP growth, inflation, the exchange rate, and the monetary policy rate — to assess the state of the Nigerian economy.
Growth is broadening and more demand-supported: The latest PMI reading provides a stronger economic growth than the June reading. Services have returned to expansion after three consecutive months of contraction, and agriculture remains robust. Most notably, new orders have moved into expansion, indicating that growth is being supported by underlying firm demand. This aligns with our view of robust economic growth in Q3-26 and our 2026E forecast of 4.28% y/y.
Disinflation returning amid elevated cost pressures: While both the input and output price indices remain above the 50.0 threshold, their continued moderation is a positive signal for inflation, which stood at 15.91% y/y in June 2026 (May: 15.93%). We, therefore, expect inflation to moderate gradually as cost pressures ease. This should gradually reduce operating expenses and ease price pressures on consumers.
A stable naira continues to reinforce the recovery: The currency has traded within a NGN1,356.27/USD–NGN1,383.63/USD band since June 2026. In our view, this remains the strongest positive tailwind for the business environment. It reduces uncertainty around imported inflation and limits the naira cost of foreign-currency liabilities.
Monetary Policy May Become Accommodative: The July print strengthens the case for a near-term reassessment of policy direction. The Monetary Policy Rate (MPR) remains at 26.5% against inflation of 15.91% (June 2026), keeping real rates positive and credit expensive, particularly for the industry sector. At the same time, new orders have picked up, and price pressures are moderating, although still elevated. Should the disinflation trend persist, we could see a gradual pivot in monetary policy towards supporting growth. However, the CBN is likely to remain cautious until the improvement in demand proves sustained.