IMPI links Nigeria’s rising PMI to steady decline in inflation

The Independent Media and Policy Initiative (IMPI), a notable think tank, has linked the steady rise in Nigeria’s Purchasing Managers’ Index (PMI) to a sustained decline in inflation for the seventh consecutive month. The PMI, which reflects the overall health of the economy, has recorded eleven consecutive months of expansion since the beginning of 2025.

In a statement issued on Friday by its chairman, Dr Omoniyi Akinsiju, IMPI disclosed that the group used the Predictive Regression (PR) model with Ordinary Least Squares (OLS) techniques to analyse the relationship between inflation and key economic drivers, including the PMI and exchange rates. “We observed a consistent pattern of increased productivity and general price reductions, particularly from August 2025,” it said.

IMPI explained that an increase in PMI generally corresponds with a decline in inflation because a higher PMI indicates stronger growth momentum in production and productivity across Nigeria’s 36 sectors. The PMI has remained above the 50.0 threshold throughout 2025, signalling sustained expansion in economic activities.

The think tank noted that the downward trend in the Consumer Price Index (CPI) has mirrored PMI growth. For instance, inflation fell from 24.23% in March to 23.71% in April 2025 and continued easing in subsequent months, reaching 16.05% in October, while the PMI rose to 55.4, marking a strong and broad-based economic expansion.

IMPI highlighted month-by-month developments showing how incremental PMI gains reflected corresponding declines in inflation: May (PMI 52.46, inflation 22.97%), June (PMI 52.3, inflation 22.22%), July (PMI 52.7, inflation 21.88%), and September (PMI 54.0, inflation 18.02%).

The think tank reaffirmed its projection that Nigeria’s inflation rate would fall to 14% by the end of 2025, supported by expected PMI expansion in November and December.

IMPI also cited the role of the Central Bank of Nigeria (CBN), noting that the Monetary Policy Committee (MPC) has already reduced the Monetary Policy Rate (MPR) by 50 basis points to 27% and is expected to cut it further by 100 basis points to 26% at its November meeting. The group said this monetary easing aligns with the softer inflation outlook.

“Going forward, we anticipate further reductions in the MPR as the economy continues to expand, validating our projections for both inflation and interest rate trends,” IMPI concluded.