Nigerian businesses are maintaining a positive outlook on the economy despite mounting concerns over multiple taxation, insecurity and high borrowing costs.
The latest Business Expectations Survey released by the Central Bank of Nigeria (CBN) showed that the Business Confidence Index stood at 13.4 points in September, indicating that businesses remained optimistic about the operating environment.
But beneath the optimism is a list of challenges that continues to weigh heavily on businesses.
High and multiple taxation emerged as the biggest concern, recording 67.1 index points. Insecurity followed at 66.2 points, while high interest rates recorded 64.3 points.
Unfavourable political conditions and high bank charges were also identified among the major constraints facing businesses.
The findings present a mixed picture of Nigeria’s business environment: firms appear increasingly confident about the direction of the economy, but the cost of operating remains a major obstacle.
For small and medium-sized businesses in particular, the combination of taxes, security-related disruptions and expensive credit can directly affect how much they invest, how many workers they employ and ultimately how much consumers pay for goods and services.
Yet businesses are not entirely pessimistic.
The CBN said increased demand, economic diversification and access to finance were among the major factors supporting business confidence in September. The Industry sector recorded the strongest improvement, with its confidence index rising from 17.1 points in August to 19.4 points in September.
The outlook for the naira is also relatively positive. Businesses surveyed by the CBN expect the currency to record modest gains against the US dollar over the coming months, while borrowing costs are expected to remain elevated despite expectations of some moderation.
The development comes after the CBN’s Monetary Policy Committee reduced the Monetary Policy Rate from 26.5 per cent to 23 per cent at its September meeting, while retaining the Cash Reserve Requirement for deposit money banks at 45 per cent.
The rate cut could eventually provide some relief to businesses, but its impact will depend largely on how quickly lower policy rates translate into cheaper credit for companies and consumers.
For now, the message from the CBN survey is clear: business confidence is improving, but the cost of doing business remains a serious threat to that optimism.
If the government wants the current optimism to translate into more investment, jobs and lower prices, businesses will need more than improved economic indicators. They will need a business environment where taxes are predictable, security is stronger and access to affordable credit improves.
