The Nigeria Economic Society Group (NESG) first “Business Confidence Monitor” (BCM) report, published in conjunction with Stanbic IBTC Bank, titled “Gauging the Pulse of Nigeria’s Business Environment”, shows that Nigeria’s business climate is predominantly unfavorable. As per the research, which covers January to September 2024, the country’s business performance score of -11.13 shows a drop in activities when compared to 2023. This reflects a challenging environment in which businesses deal with increased operational issues brought on by inflation, restricted access to financing, and declining demand. The first nine months of 2024 saw poor performance from the majority of enterprises across all industries.
Agricultural sector had the lowest performance (-22.22), followed by Trade (-13.21) and Manufacturing (-6.07). Services (-2.58) and non-manufacturing (-5.21) had the least unfavorable business conditions. High prices for goods and services (-26.14), limited credit availability (-21.14), reduced cash flow (-1.02), and poor demand circumstances (-29.73) were the main causes of these unfavorable outcomes. The high cost of doing business (+47.64) brought on by issues including limited access to foreign exchange, a poor power supply, and Security concerns also hindered business development, raising production costs and affecting cash flows.
High operating costs, limited FX availability are the major issues.
Other issues confronted by business are cost of commercial lease/rental property (5.79%), infrastructural difficulties (6.05%), personnel turnover (6.05%), and economic instability (4.47%). As indices of business confidence across all the variables were negative, the BCM indices across key performance metrics highlight the typically limited operating environment for agribusinesses in the low-performing Agriculture sector. The BCM research also identified sector-specific barriers, with high operating costs, restricted Finance availability, and limited foreign exchange availability being the major issues.
Even in the face of recent interventions in Nigeria’s foreign exchange market meant to increase liquidity and stability, businesses still struggle to obtain reasonably priced financing, which raises input costs and reduces output levels. Also, businesses indicated that their Export order books were below average, which led to a -13.30 export index. According to the research, positive net balance on Nigeria’s BCM indexes which vary from -100 to +100 would demonstrate business confidence, however, the current negative index indicates that economic activity is still muted.
Increased investment expected to drive more activities.
While current structural problems continue to disrupt economic activity and inspire an unusual trend of barriers to business expansion, the macroeconomic environment continues to adapt to recent reforms. With key BCM leading indicators displaying a cautiously pessimistic outlook, the responses from businesses surveyed across the Trade, Agriculture, Manufacturing, Non-manufacturing, and Services sectors suggest that economic activities will continue to endure a fragile turnaround and restrained business growth over the coming months. However, with a positive future anticipation index of +26.86, the BCM study also shows cautious optimism for the future.
In the upcoming months, businesses expect an increase in activity driven by increased investment, improved export performance, and rising demand, cash flows, and employment. With a future outlook rating of +30.54, the non-manufacturing sector is in the lead, followed by commerce (+24.46), agriculture (+23.87), manufacturing (+21.28), and services (+2.54). Expected increases in output (+37.50), Investment (+44.88), and operating profit (+28.91) over the next one to three months are the driving forces behind this cautious optimism. The majority of businesses anticipate better overall business conditions and higher output levels, while short-term regression is anticipated in financial conditions, supplier orders, and prices.
Related Article: Businesses Struggle to Adjust to Fuel Prices
Looking ahead, the research noted that 35.7 percent of businesses surveyed intend to increase output in the near future, despite the difficult business situation. Business managers’ optimism suggests that Q4 2024 could see a rebound propelled by seasonally greater production. However, it is anticipated that high prices will continue to have an impact on employment and cash flow, especially in manufacturing, trade, and agriculture, where high operating costs and restricted access to financing continue to be major barriers. Businesses are nonetheless wary of possible setbacks in supply orders, pricing stability, and financial conditions, even though the country may experience a shaky rebound.