Nigeria’s economic recovery is encountering a formidable set of challenges as businesses grapple with surging operational costs, which threaten to undermine recent gains in corporate activity and investment confidence. Despite a broad-based expansion across key economic sectors, the latest Business Confidence Monitor (BCM) report by the Nigerian Economic Summit Group (NESG) reveals a growing disconnect between improving business performance and companies’ willingness to commit capital. This trend underscores a pivotal moment for Nigeria’s economy, where the sustainability of recovery hinges on addressing structural inefficiencies that continue to stifle growth.
A Mixed Picture of Economic Expansion
The Current Business Performance Index (CBPI) for July 2025 rose to 108.6 points, up from 104.6 points in June and 105.4 points in the same period of the previous year. This indicates a strengthening economic expansion, with non-manufacturing industries leading the charge, while nearly all major sectors, including services, recorded growth. Notably, companies reported higher production levels, improved profitability, and stronger demand, signaling a positive trajectory for corporate Nigeria.
However, the report highlights a critical paradox: while businesses are expanding operations and profitability, investment remains stagnant, with the Investment Index contracting—a stark contrast to the overall growth narrative. This reluctance to invest is primarily driven by escalating operational costs, including energy expenses, financing challenges, inadequate infrastructure, and security concerns, which are squeezing profit margins and discouraging capital outlays.
Structural Constraints Weighing on Business Growth
The NESG report identifies five key constraints that are undermining business expansion:
- Limited Access to Finance – Businesses continue to face tightening credit conditions, with slightly weaker access to credit in July, reinforcing concerns about financing as a major obstacle to growth.
- Energy Shortages – Unreliable electricity supply remains a persistent issue, particularly for manufacturing and industrial sectors, forcing companies to rely on costly alternative energy sources.
- Rising Commercial Property Rents – Escalating rental costs are placing additional financial pressure on businesses, particularly in urban centers where operational costs are already high.
- Insecurity – Persistent crime and instability in key economic zones are disrupting supply chains and deterring long-term investment.
- Poor Infrastructure – Deficient transportation, logistics, and digital infrastructure continue to hinder efficiency and increase operational expenses.
These challenges are elevating costs, reducing profitability, and delaying expansion plans across industries, raising concerns about the long-term sustainability of Nigeria’s economic recovery.
Sectoral Performance: Strengths and Weaknesses
While the overall economy shows signs of recovery, performance varies significantly across sectors:
1. Manufacturing: A Sector in Transition
The Manufacturing Business Performance Index (BPI) rose to 110.5 points in July, up from 106.4 points in June, marking a remarkable turnaround from 98.0 points in July 2024. Growth has been driven by cement, textiles, apparel, footwear, and pharmaceuticals, which have seen increased demand and production.
However, manufacturers remain constrained by:
– Tightening credit conditions, making it difficult to secure loans for expansion.
– Irregular electricity supply, forcing reliance on expensive generators.
– Shortages of raw materials, particularly in subsectors like plastic, rubber, and motor vehicle assembly.
– High rental costs and inadequate infrastructure, which increase operational burdens.
Several subsectors, including non-metallic products, pulp and paper, and motor vehicle assembly, remained in contraction, highlighting the uneven nature of recovery in manufacturing.
2. Non-Manufacturing: Oil and Gas Leading Growth
The Non-Manufacturing BPI surged to 116.6 points, the highest among all sectors, driven by strong activity in crude petroleum, natural gas, and oilfield services. This sector’s resilience reflects Nigeria’s reliance on oil and gas exports, which continue to drive economic activity despite global volatility.
Yet, businesses in this sector also face significant challenges:
– Power outages disrupt operations, particularly in oilfield services.
– Rising rental expenses in key industrial hubs.
– Infrastructure deficiencies, including poor road networks and port inefficiencies, which increase logistics costs.
3. Agriculture: Favourable Weather, Persistent Challenges
Agriculture recorded strong expansion, with the Agriculture BPI rising to 110.8 points from 103.9 points in June, supported by favourable rainfall and improved crop production. However, operators continue to face:
– Insecurity, particularly in key agricultural zones, which disrupts supply chains.
– Poor infrastructure, including inadequate storage and transportation facilities.
– Energy shortages, which limit mechanization and post-harvest processing.
– Limited access to finance, making it difficult for smallholder farmers to scale operations.
4. Services Sector: Mixed Signals
The Services BPI returned to expansion (108.3 points) after contracting in June, driven by financial institutions, real estate, and professional services. Stronger corporate earnings in financial services contributed to this rebound.
However, telecommunications and information services slipped back into contraction, struggling with:
– Power cuts, which disrupt network operations.
– Regulatory uncertainty, affecting investment decisions.
– High rental costs in major business districts.
– Weak access to credit, limiting expansion plans.
5. Trade: Subdued but Stable Growth
Trade activity remained positive but subdued, with the Trade BPI edging up to 102.8 points from 102.0 points in June. Growth was marginal, reflecting limited access to finance, energy shortages, logistics bottlenecks, and regulatory constraints that suppress stronger expansion in wholesale and retail trade.
Future Outlook: Cautious Optimism
The Future Business Expectations Index eased slightly to 128.3 points in July from 128.4 points in June, indicating that optimism remains positive but is beginning to soften. While trade and manufacturing businesses expressed strong confidence about the coming months, agriculture and services sectors were markedly less optimistic.
The more cautious outlook stems from renewed concerns over cost pressures, particularly the potential impact of the Dangote Refinery’s shift to dollar-denominated petrol pricing. Businesses fear that this move could further elevate energy costs, exacerbating financial strain across industries.
The Path Forward: Policy Interventions Critical for Sustainability
The NESG report underscores that Nigeria’s economic recovery is at a critical juncture. While demand-driven growth is visible, the sustainability of this recovery depends on policymakers’ ability to address structural inefficiencies:
- Cheaper Financing – Expanding access to affordable credit to support business expansion and job creation.
- Improved Electricity Supply – Investing in renewable energy and grid infrastructure to reduce reliance on costly generators.
- Better Infrastructure – Enhancing transportation, logistics, and digital networks to lower operational costs.
- Lower Energy Costs – Implementing long-term solutions to stabilize fuel prices and reduce volatility.
Without these interventions, the report warns, businesses may continue to postpone critical investments, delaying job creation, production expansion, and sustained economic growth.
Conclusion: A Delicate Balance Between Recovery and Stability
Nigeria’s economy is showing signs of recovery, with output rising and most sectors expanding. However, the sustainability of this growth hinges on reducing the cost of doing business. If structural challenges—such as high energy costs, financing constraints, and poor infrastructure—are not addressed, the nascent recovery could lose momentum, leaving businesses hesitant to commit to long-term investments.
The Dangote Refinery’s pricing shift, rising rents, and security concerns add layers of complexity, requiring urgent policy responses to ensure that Nigeria’s economic rebound translates into lasting prosperity. The coming months will be decisive in determining whether Nigeria can consolidate its recovery or face another period of stagnation.
