In January 2025, Nigeria’s business environment showed some signs of getting better, but many companies were still finding it hard to make a profit. This struggle was largely due to the high exchange rate of the local currency and the increasing costs of importing goods.
This information comes from a report called the Business Confidence Monitor, which was created by the Nigerian Economic Summit Group in partnership with Stanbic IBTC.
The report explained that while there was a slight increase in business activities at the start of the new financial year, companies were still facing significant challenges. These challenges included difficulties in getting foreign currency, high costs for loans, and rising prices overall (inflation).
One major issue highlighted was the high exchange rate of Nigeria’s currency compared to other major currencies. This, combined with the rising costs of imports, was making it hard for businesses to stay profitable and to set their prices effectively.
Additionally, many businesses found it tough to access financing, which is essential for growth and expansion. The report showed that while there was a slight improvement in the overall business performance index, the costs associated with running a business remained quite high.
In January, the Business Performance Index rose to 5.69, a significant jump from December’s 0.77. However, the cost of doing business was still high at 47.58, although it was slightly lower than the previous month’s 50.32.
Companies were also dealing with frequent power outages, limited access to credit, and uncertainty about government economic policies. These factors were making it even harder for businesses to be profitable.
The report pointed out that the high exchange rate and increasing import costs were the main reasons for shrinking profits, while weak demand for goods and services was making it difficult for businesses to earn enough revenue.
Investment in businesses dropped significantly, indicating that fewer funds were coming in, and rising production costs, especially in manufacturing and services, were putting more strain on profit margins.
Different sectors of the economy were performing differently. The manufacturing sector saw a slight improvement, but it was still in the negative range. High costs of production, challenges in accessing foreign currency, and low consumer demand were significant hurdles.
In the textile and apparel industry, there was a sharp decline, while the automotive sector faced even more severe challenges. The non-manufacturing sector, which includes industries like oil and gas, construction, and natural gas, also experienced a downturn.
In January, the non-manufacturing sector’s performance dropped to -4.64, down from 5.80 in December, indicating that business activity was slowing down. Investment levels in this sector fell sharply as companies hesitated to expand due to economic uncertainty and high borrowing costs.
The services sector also faced difficulties, although it showed a slight improvement from the previous month. Broadcasting and professional services were among the hardest hit, while telecommunications and financial services performed better due to seasonal demand.
The trade sector showed some recovery, with better sales at the start of the year. Although the wholesale segment remained in the negative, the retail segment saw positive growth, benefiting from increased consumer spending.
The agriculture sector was the only one to show positive performance overall, but its growth had slowed compared to the previous month. Crop production and livestock saw modest increases, while other areas struggled with high costs and lower demand.
Despite the challenges, businesses were somewhat optimistic about the next three months. The Future Business Expectation Index rose, indicating that companies expected improvements in production, cash flow, employment, and profits. However, they were still worried about inflation, high interest rates, and weak consumer spending, which could hinder their growth.
