*IMPI links Nigeria’s PMI to inflation decline, insists on 14% year-end projection*
Notable Think Tank , the Independent Media and Policy Initiative (IMPI) has established a link between the steady increase in Nigeria’s Purchasing Manager’s Index (PMI) and the decline in inflation in the country for the seventh consecutive month.
This according to the policy group is because the PMI reflects the state of health of the economy of a country.
In a statement signed by its Chairman Dr Omoniyi Akinsiju, IMPI posited that Nigeria’s PMI recorded eleventh consecutive month of expansion since the beginning of 2025.
It said: “By adopting the Predictive Regression (PR) model which uses Ordinary Least Squares (OLS) techniques to model inflation as a function of lagged values of key drivers, such as exchange rates or the Purchasing Manager’s Index (PMI), we were able to establish a consistent pattern of increased productivity and general price reduction with higher intensity beginning from August 2025.
”By our reading, we attest to the inverse relationship between Nigeria’s Purchasing Managers’ Index (PMI) and inflation rate movements. To put this in context, an increase in PMI reflects in a decline in inflation because a PMI hike is suggestive of a higher growth momentum in production and productivity measured across 36 sectors of the economy.
”Since the beginning of the year, the PMI has shown consistent expansion with the latest reading for October being 55.4, indicating a strong and broad-based growth. This marks the eleventh consecutive month of expansion, driven by growth in output, new orders, and employment across various sectors.
”The PMI has remained above the 50.0 threshold throughout 2025, signalling a sustained expansion in economic activities.
”This, essentially, is predictive of the general movement of household items’ prices as captured in the Consumer Price Index (CPI). This had been trending downward, effectively, since April 2025 when it eased to 23.71% year-on-year compared to March 2025, when it rose to 24.23% year-on-year from 23.18% in February 2025.”
It also noted that since April this year, Nigeria’s PMI had been recording sustained growth which reflected in the downward trend of inflation and added that whenever there is a slowdown, it also showed in the inflation figure.
”Reflecting the same quantum movement, the Central Bank of Nigeria (CBN) reported a composite Purchasing Managers’ Index (PMI) of 52.40 index points for April 2025, indicating a sustained expansion in economic activities.
”This was an increase from the 52.30 index points recorded in March 2025 and was driven by growth in both the services and manufacturing sectors.
”Nigeria’s PMI in May 2025, showed a slow uptick from a composite index of 52.1 index point for the month, indicating a 0.060 index point above the April 52.40 index point.
”The slow upward movement in PMI is evidenced in the equally slow decline in inflation rate to 22.97% in May from 23.71%, a 0.74% difference.
”Again, in June 2025, the CBN’s composite PMI expanded by a low 0.2 index point to 52.3 from the 52.1 recorded in May 2025. In the same token, Nigeria’s headline inflation rate eased to 22.22% in June 2025 on a year-on-year basis, and like the PMI movement between April and May, the reduction was by a low 0.75% from the 22.97% recorded in May 2025.
”In July, Nigeria’s economic expansion continued with the CBN PMI for the month at 52.7 showing another low 0.4% marginal growth between June and July which also reflected in the July 2025 year-on-year inflation rate that dropped to 21.88%, down from 22.22% in June with a marginal difference of 0.34%.
”However, in September, the trend with both the PMI and the inflation rate took on a higher momentum with the PMI rising to 54.0, indicating a stronger pace of economic expansion for the tenth consecutive month.
”This faster pace of increase in the PMI also reflected in the inflation rate which vastly improved from 20.12% in August 2025 to 18.02% in September 2025, a 2.1% decline from the August figure and by trend analysis, a quantum leap when compared to the rate of inflation decline.
”The trend in the relationship and movements between the PMI and inflation is further sustained by their respective October figures with the CBN Composite PMI recording 55.4 index points, a significant increase in the PMI recorded between April and September 2025.
”This larger margin of difference also reflected in the country’s headline inflation rate which declined at a much faster rate to 16.05% in October 2025 from 18.02% in September 2025, a decrease of 1.96%,” it said.
IMPI also affirmed its position on a 14% inflation figure by the end of the year as well as a reduction of the benchmark rate by the Central Bank’s Monetary Policy Committee.
”Going forward, we estimate further expansion in the PMI for the months of November and December 2025 which will also reflect in the inflation rates for the two months. In consideration of this, we reiterate that the inflation rate will decline to 14% by year end as projected in our Policy Statement 030.
”In addition, we also projected in Policy Statement 029 issued before the last meeting of the CBN Monetary Policy Committee (MPC) in September 2025 that we expect it to reduce the Monetary Policy Rate (MPR) by 150 basis points to 26% by year end. The Committee, as a first step, reduced the MPR by 50 basis points to 27% from 27.50%.
”Again, we reiterate that the softer inflation outlook validates the expectations for additional monetary easing by the CBN at its November policy meeting.
”We therefore expect as a follow-up to our earlier projection, that the MPC will reduce the MPR by 100bps to 26.0% when it meets on the 24th and 25th of this month to determine the country’s benchmark interest rate,” the think tank added.
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