Rising Costs Weigh on Business Confidence – NESG

Businesses recorded stronger performance across Nigeria in July, but rising operating costs, energy concerns and limited access to finance continued to threaten investment and future growth, according to the Nigerian Economic Summit Group (NESG).

The group’s latest Business Confidence Monitor (BCM) showed that although firms expanded their activities during the month, many remained weighed down by higher input costs, inadequate electricity supply, insecurity, high rental costs and poor infrastructure, all of which increased the cost of doing business.

The report said the Current Business Performance Index rose to 108.6 points in July from 104.6 points in June, indicating stronger business conditions across the economy.

The improvement was driven by broad-based growth, particularly in the non-manufacturing sector, while services also returned to expansion after weaker performance in the previous month.

According to the survey, business indicators such as production, demand conditions, operating profit, financial results, employment and cash flow all remained in expansion territory. However, investment continued to contract, reflecting the impact of persistent financing and operating challenges.

Sectoral performance was largely positive. Agriculture recorded stronger growth as favourable rainfall and early harvests supported crop production, while manufacturing improved on the back of stronger activity in cement and textile, apparel and footwear.

The non-manufacturing sector posted the strongest expansion, supported by oil and gas services and crude petroleum activities, while the services sector returned to growth. Trade also remained in expansion, though its growth was modest.

Businesses nevertheless remained optimistic about the next one to three months, with the Future Business Expectations Index standing at 128.3 points in July. The reading was only slightly below June’s 128.4 points, suggesting that confidence remained resilient despite growing concerns over operating costs.

NESG said optimism was strongest among businesses in the trade and manufacturing sectors but weaker in agriculture and services. It added that companies were becoming more cautious because of expectations that the recent shift to dollar-denominated petrol pricing by the Dangote Refinery could keep energy costs elevated in the coming months.

The report concluded that while businesses continued to show resilience and maintain growth momentum, addressing financing constraints, infrastructure deficits and energy challenges would be critical to sustaining investment and improving operating conditions.