A new report by the Nigeria Economic Summit Group (NESG) in partnership with Stanbic IBTC reveals that businesses continue to be strained by economic challenges such as high inflation and interest rates coupled with instability of the Naira in the foreign exchange market.
The NESG-Stanbic IBTC Business Confidence Monitor for October states that the Nigerian business environment is characterised by weak performance and a bleak future.
According to the report, the performance of businesses in the country in October at s -23.24 was weaker than the previous month. The top impediments to growth were inadequate power supply, insecurity and limited access to financing.
The report noted that Nigeria’s business environment is facing significant challenges due to persistent inflation, which is raising costs and reducing purchasing power.
Furthermore, it noted major obstacles include limited access to finance, low employment levels, and restricted cash flow, all of which are pushing up operational costs, discouraging investment, and weakening demand.
Also, Naira instability was highlighted as raising import costs and complicating financial planning, with low export performance also affecting profitability.
The report states, “The country’s business operating environment continues to face severe challenges, with several underlying economic issues intensifying. Inflation remains high, eroding purchasing power and raising operational costs. Additionally, the Central Bank of Nigeria’s (CBN) hike in the Monetary Policy Rate (MPR) has led to higher credit costs, further straining business operations.”
“Moreover, the Naira instability has raised import costs and complicated financial planning, negatively impacting profitability and pricing strategies. Export performance has also been weak, with businesses reporting below normal export order books, resulting in an export index of -12.65.”
Business performance across sectors
In October 2024, the NESG-Stanbic IBTC BCM index for the Agriculture sector showed a mildly negative business performance at -30.47 points.
- The report noted that ongoing flooding in key food-producing states, worsened by prolonged rainfall in Q4 2024, resulted in extensive losses of farmland, crops, yields, and grazing areas. All five agriculture sub-sectors faced negative performance, with the Agro-Allied sub-sector experiencing only a slight decline at -0.99, while the remaining four sub-sectors suffered significant business performance declines.
- Nigeria’s Manufacturing sector encountered considerable difficulties in October 2024, as the NESG-Stanbic IBTC BCM index fell to -28.72, indicating mildly negative business performance and a marked decline from the prior month.
- The Services BCM index recorded -6.19 points, indicating mildly negative business performance. The decline highlights increasing operational challenges, mainly due to rising energy costs from frequent national grid failures, ongoing fuel shortages, and higher petrol prices.
The Trade BCM index was reported at -23.45, indicating mildly negative business performance in the sector. Within its sub-economic activities, retail showed a mildly negative performance at -14.99, while Wholesale experienced a notably negative performance at -31.90.