Economy exits contraction but households remain pessimistic — CBN

•As PMI increases to 50.1 points
•Business confidence reduces to 7.2 points
•Households avoid homes, vehicles, and investments

•Food continues to be the primary expenditure focus

By Babajide Komolafe

Nigeria’s economy moved out of recession in June as the Purchasing Managers’ Index, PMI, improved to 50.1 points compared to 49.6 points in May, supported by consistent growth in the agricultural sector, even though the industrial and service sectors remain weak, as noted in the latest PMI Report released yesterday by the Central Bank of Nigeria, CBN.

However, a different report, the Household Expectations Survey (HES), which was also released yesterday by the central bank, indicated that Nigerians maintained a negative outlook on the current economic situation in June, despite a rising sense of optimism regarding the future.

PMI Reports center on businesses, while HES primarily conducts surveys on households.

At the same time, a third report that CBN published yesterday revealed a decline in business confidence among Nigerian companies for the fourth straight month in June.

As per the central bank, “The composite PMI rose to 50.1 points in June 2026, signaling a return to growth in overall economic activity after the downturn experienced in May 2026.” The report elaborated: “Among the 36 subsectors observed, 19 showed growth, while 17 experienced reductions in business operations.”

The CBN credited the upturn solely to agriculture, stating: “The Agriculture PMI improved to 52.1 points in June 2026, up from 50.9 points in May 2026, indicating a stronger growth trajectory and marking the twenty-third month of continued expansion in the sector.” It further pointed out that “all five agricultural subsectors surveyed experienced growth during this review,” with Forestry showing the most significant increase.

Nonetheless, the report indicated that manufacturing and services continued to face difficulties. It remarked: “The Industry PMI was at 49.5 points in June 2026, indicating a decline in industrial activity,” while “The Services PMI recorded 49.4 points in June 2026, reflecting a downturn in business activity within that sector.”

Regarding the future of the overall economy, the CBN stated: “The June 2026 PMI suggests a slight recovery in overall economic activity, bolstered by sustained growth in the agricultural sector, which compensates for the contractions seen in the Industry and Services sectors.”

The report noted: “The return of the composite PMI to an expansion phase, along with reduced pressures on input and output prices, implies improving business conditions and offers a more cautiously optimistic forecast for economic development in the near future.”

Further supporting indications of decreasing cost pressures, the central bank indicated: “The composite indices for input and output prices fell by 2.5 and 0.8 points, respectively, in June 2026, hinting at a reduction in cost and pricing pressures.”

The report also mentioned: “The Industry PMI slightly went up to 49.5 points in June 2026 from 49.3 points in May 2026, indicating a slower contraction rate in industrial activity,” while “The Services PMI saw a minor increase to 49.4 points in June 2026 from 49.3 points in May 2026. Although the sector continued in contraction for the third straight month after fourteen months of consistent growth, this increase suggests a slower rate of decline.”

Optimism remains low.
However, Nigerians continued to have a negative perspective on the current economic situation in June, even though there was an increasing sense of hope regarding the medium-term prospects indicated by the PMI results.

As per the CBN's Household Expectations Survey (HES), families have maintained a focus on food expenses while putting off buying homes, cars, and other significant assets.

In its HES report for June 2026, the central bank noted: “The Overall Consumer Sentiment for June 2026 was measured at -14.6 index points, an improvement from -16.8 index points noted in May 2026, demonstrating a still cautious but gradually enhancing view of the larger economy.” It further mentioned: “The Economic Conditions index was at -18.5 points in June 2026, reflecting a negative sentiment regarding present financial conditions among households.”

Nevertheless, the report highlighted a shift towards better expectations, indicating: “By September 2026, consumer confidence turned positive at 3.1 points, propelled by an encouraging outlook on personal income and general economic conditions.” It also observed: “For the upcoming six months, the Consumer Confidence Index appeared optimistic at 11.7 points, showing hope based on favorable prospects for family income, economic conditions, and an improvement in financial situations.”

Regarding spending priorities, the CBN remarked: “Throughout all periods surveyed, participants consistently placed importance on essential expenditures like food, transportation, and household items, including utilities such as Electricity and Water.” It mentioned: “Food has been the top expected expense and is anticipated to maintain its position as the primary focus in the next six months.” Following this, transportation, household goods, and education were highlighted as the other significant areas for spending.

The survey also indicated ongoing caution towards significant purchases. The report revealed, “Households demonstrated hesitation to allocate substantial portions of their earnings towards major purchases like homes and vehicles, as reflected by negative sentiment indices across all assessed periods.”