Nigerian businesses continued to face significant operating pressures in September, with multiple taxation, insecurity, and elevated interest rates emerging as the biggest obstacles to business activity, according to the Central Bank of Nigeria. The apex bank's latest Business Expectations Survey showed that although firms remained under pressure, overall business sentiment stayed positive during the month. The survey revealed that businesses expect conditions to improve over the coming months, driven largely by stronger demand, economic diversification, and improved access to finance.
The Business Confidence Index stood at 13.4 points in September, indicating that businesses remained optimistic about the operating environment despite the challenges confronting them. Tax-related pressures ranked as the most significant concern among businesses surveyed by the CBN, with high or multiple taxation recording 67.1 index points. This was followed by insecurity, which ranked second with 66.2 points, while high interest rates recorded 64.3 points, highlighting the combined pressure of government charges, security risks, and expensive credit on business operations.
Other major constraints identified by respondents included an unfavourable political climate at 61.8 points and high bank charges at 61.5 points. Competition recorded 60.2 points, while unclear economic laws and an unfavourable economic climate each scored 58.7 points. Financial constraints recorded 57.5 points, while poor infrastructure came last among the 10 major constraints, with 55.0 points. The findings suggest that while infrastructure remains a longstanding challenge for businesses, firms currently consider taxation, insecurity, and the cost of borrowing more immediate threats to their operations.
Despite the constraints, the CBN said businesses maintained a positive outlook in September. Respondents attributed their optimism primarily to increased demand, economic diversification, and access to finance. Increased demand accounted for 29.3 per cent of the factors supporting the positive outlook, followed by economic diversification at 18.9 per cent and access to finance at 13.5 per cent. The industry sector recorded the strongest improvement in sentiment during the month.
The persistence of high interest rates could continue to weigh on investment and expansion plans, particularly for businesses that depend heavily on bank financing for working capital and new projects. On the foreign exchange market, businesses remained optimistic about the naira, with respondents expecting the currency to record modest gains against the US dollar across the various review periods. Regional sentiment was broadly positive, although the CBN identified a notable exception.
Businesses across the regions expressed optimism about the macroeconomic outlook for the coming month, with the South-East the only region that did not share the positive near-term outlook. The North-East emerged as the most optimistic region across the forecast periods. The CBN's Business Expectations Survey provides valuable insights into the challenges and opportunities facing businesses in Nigeria, highlighting the need for policymakers to address the concerns of firms and promote a more favourable business environment.
The CBN's findings highlight the need for a comprehensive approach to addressing the challenges facing businesses in Nigeria. By addressing the issues of multiple taxation, insecurity, and high interest rates, policymakers can help create a more conducive business environment that fosters growth and development. The survey's results also underscore the importance of infrastructure development and access to finance in supporting business operations and promoting economic growth.
Key points
- Tax-related pressures ranked as the most significant concern among businesses surveyed by the CBN.
- Insecurity and high interest rates were the second and third most significant concerns, respectively.
- Businesses maintained a positive outlook in September, citing increased demand, economic diversification, and access to finance as key factors supporting their optimism.
