Nigeria’s Business Performance Index Improves, Boosting Economic Outlook

Nigeria’s business environment showed signs of improvement in January 2025, with the Nigeria Economic Summit Group’s NESG-Stanbic IBTC Business Confidence Monitor (BCM) recording a Business Performance Index of +5.69—a notable rise from December 2024’s +0.77. This positive shift, though modest, signals a gradual economic recovery fuelled by increased business activities at the start of the year.

Despite persistent challenges such as inadequate power supply, foreign exchange constraints, and limited financing, businesses across key sectors expressed cautious optimism about the economic outlook. The report highlights key trends, sectoral performances, and expectations for the coming months.

Business Performance in January 2025

The Nigerian economy started the year with a weak but positive business performance, reflecting improved commercial activity. However, sectoral outcomes varied:

• Agriculture (+10.86): The only sector to record positive growth, driven by strong demand for crop production and livestock.
• Trade (-0.84), Manufacturing (-0.66), and Services (-1.40): These sectors showed mild negative performances, yet they improved compared to the previous month.
• Non-Manufacturing (-4.64): experienced the weakest performance, largely due to investment slowdowns and structural challenges.

A significant factor supporting business confidence was exchange rate stability, which helped curb rising operational costs. However, major hurdles such as power shortages and high financing costs continued to dampen growth prospects.

Sectoral Highlights

Agriculture: Strongest Performer Amid Structural Challenges

The agriculture sector maintained a weakly positive outlook, with an index of +10.86, supported by a bumper harvest and improved security in key food-producing regions. However, challenges in agro-allied industries and rising input costs posed concerns.

Manufacturing: Signs of Recovery Despite High Costs

The manufacturing sector (-0.66) showed a notable recovery from December 2024’s -2.43. While some sub-sectors, like food and beverages (+8.68) and basic metal (+6.43), performed well, others—particularly textile and apparel (-27.71) and motor vehicles (-37.14)—struggled due to weak demand and high production costs.

Trade: Mild Recovery with Increased Consumer Activity

The trade sector (-0.84) saw a significant improvement from December’s -5.59, signaling a recovery in business confidence. The retail sub-sector (+1.20) performed better than wholesale trade (-2.87), reflecting increased consumer spending.

Services: Cost Pressures and Uncertainty Persist

The services sector remained weak at -1.40, with rising energy prices and exchange rate fluctuations affecting profitability. While financial institutions (+37.83) and real estate (+18.67) showed resilience, broadcasting (-30.35) and professional services (-5.92) struggled.

Non-Manufacturing: Decline Driven by Investment Slowdowns

The non-manufacturing sector (-4.64) faced the biggest decline, with oil and gas services (-24.70) leading the downturn. However, construction (+4.76) and natural gas (+5.71) showed positive performance, benefiting from ongoing infrastructure projects.

Future Business Expectations: Optimism Despite Risks

Looking ahead, Nigerian businesses remain optimistic, with the Future Business Expectations Index rising to +31.96. Key drivers include:

• Manufacturing (+57.31) and Non-Manufacturing (+50.07) sectors showing strong confidence.
• Anticipated growth in production (+75.22), employment (+73.20), and cash flow (+70.27).
• Investment sentiment (+69.46) is improving despite concerns over inflation and high interest rates.

However, businesses remain cautious about rising inflation, fluctuating exchange rates, and limited credit access, which could impact profitability and expansion plans.

Conclusion

While Nigeria’s business climate remains challenging, January 2025 marked a turning point towards recovery. The gradual improvement in economic conditions, coupled with sectoral resilience, suggests a positive trajectory for the months ahead. However, sustained policy interventions, improved credit access, and a stable power supply will be critical in ensuring long-term business growth and confidence.

 

 

 

NESG