According to the NESG – Stanbic IBTC Business Confidence Monitor (BCM) report for October 2024, a hostile business environment is a key element sustaining weak business performance in Nigeria.
About the BCM Report
The Business Confidence Monitor is a survey-based report of the Nigerian Economic Summit Group (NESG), supported by Stanbic IBTC. The report is carried out by obtaining qualitative information on the current business sentiment within the Nigerian economy and gauges expectations about overall economic activities in the short term.
Nigeria’s Current Business Environment
Nigeria’s business environment is currently bedeviled by a myriad of challenges ranging from inflation, power supply issues, foreign exchange volatility, and fuel price hikes amongst other issues.
A combination of these factors has greatly limited business performance across diverse sectors of the Nigerian economy.
Sectoral Outlook
A look into different sectors of the economy revealed the Agricultural sector witnessed a business condition decline of -30.47 points, signaling a mildly negative business performance. This is a result of ongoing structural challenges including insecurity, infrastructure deficits, and elevated input costs driven by exchange rate depreciation in the sector.
Persistent flooding in major food-producing states in Q4-2024, due to incessant rainfall, also led to significant losses in farmland,
crops, yields, and grazing areas, and ultimately food scarcity across the country.
The manufacturing sector also fell to -28.72 in October 2024, reflecting mildly negative business performance and a notable decline from the previous month. This fall is driven by high interest rates, inflation, and rising cost of production in addition to constrained access to credit facilities.
The Non-manufacturing sector on the other hand witnessed a BCM index decline of -28.16 attributed to a surge in the cost of doing business, especially in the Oil and gas sector which witnessed a -66.71 fall in its BCM index.
The service sector also had a -6.19 points BCM index decline owing to rising energy costs driven by repeated national grid collapses, ongoing fuel shortages, and increased petrol prices which has driven up operation costs in the sector. An 8.1% depreciation in the value of the Naira also did not help matters as it has contributed to driving up the operational cost of service industries dependent on imports to function.
The trade sector witnessed a BCM index of -23.45 with wholesale trade facing a decline of -31.90 while retail trade saw a -14.99 decline in Business confidence as a result of limited access to credit, stemming from high borrowing costs, high unemployment rate, and strained
cash flows, multiple taxation, exchange rate depreciation, rising energy costs as well as increased cost of transportation which has further
eroded the purchasing power of Nigerian consumers and at the same time drove up the cost of doing business in the sector.
Future Projections
The report projects a cautiously pessimistic outlook for the future highlighting the urgent need for policy interventions to stabilize operational costs, improve access to credit facilities, and tackle inflationary pressures that impact business activities noting that failing to do this, Businesses may face profitability challenges that may impede Nigeria’s development goals.
