Report: High Financing Costs Hindered Business Performance In February

Although the overall business climate strengthened last month, high financing costs continued to hamper business performance and future growth expectations, the latest Nigerian Economic Summit Group (NESG)-Stanbic IBTC Business Confidence Monitor (BCM) shows.

According to the survey-based report, “a higher exchange rate remained a key driver of operational costs and consumer prices.”

The report said: “Maintaining the positive momentum from the start of the year, Nigeria’s business environment showed stronger performance in February 2025.

The NESG-Stanbic IBTC Business Confidence Monitor (BCM) recorded a rise in the Current Business Index to +11.50, up from +5.69 in January 2025, signalling a sustained improvement in business activities.

“A sub-sectoral analysis revealed a generally weak business performance despite positive trends in Trade (+21.48), Manufacturing (+10.35), Non-Manufacturing (+10.21), Services (+7.15), and Agriculture (+2.69).

However, most sectors experienced relative improvements compared to January, except Agriculture, which saw a slowdown.

“Structural challenges in Nigeria’s business environment eased slightly, supporting the observed improvements. The overall business climate strengthened, but a higher exchange rate remained a key driver of operational costs and consumer prices.

The cost of doing business index remained elevated at +47.18, though slightly lower than in January 2025. Access to credit also deteriorated (+24.84) due to unfavourable macroeconomic conditions and reduced commercial activity.

High financing costs continued to constrain both current business performance and future growth expectations.”

Furthermore, the report stated: “The most significant negative impacts were reduced investment (-39.50) and declining price levels (-23.78), severely dampening business activity and demand.

Limited foreign exchange availability, persistent power shortages, unclear economic policies, restricted access to finance, and high commercial lease costs emerged as the most pressing challenges in February, hindering business expansion.

“A primary concern remains the elevated exchange rate of the local currency against major trading currencies, which, alongside rising import costs, continues to erode profitability and disrupt pricing strategies.

Limited financing access persisted as a structural barrier, further restricting business growth throughout the month.”

However, the report said: “The Business Confidence Measure (BCM) recorded a positive index of +28.32, reflecting cautious, optimistic expectations about business improvement in the next one to three months.”

“This level is slightly weaker when compared to figures for January 2025. Anticipated enhancements in the general business situation, cash flow, production levels, operating profits, and supply orders fueled this level of optimism.

“Among sectors, Trade exhibits the highest optimism with an index of +65.58, while Services, at +21.71, shows the least confidence in future performance,” it added.

According to the report, “businesses anticipate enhancements in general business situation, cash flow, production levels, operating profits, and supply orders. Demand conditions and exports are expected to improve and spur higher business activities in 2025.”

The report noted that while the NESGStanbic IBTC Future Business Expectation Index stood at +28.32 in February 2025, “reflecting cautious optimism across sectors about the future business environment,” this represents a decline from January 2025, when the index was significantly higher at +31.96.

“The drop in optimism suggests tempered confidence in economic conditions and the persistence of macroeconomic challenges.

Despite this moderation, positive sentiment remained across all major sectors, albeit with varying degrees of confidence.

“The Services sector exhibited the lowest optimism at +21.71, reflecting cautious expectations amid ongoing structural constraints and cost pressures.

Conversely, the Trade (+65.58), Manufacturing (+54.92), Non-manufacturing (+43.22), and Agriculture (+31.28) sectors displayed stronger confidence in near-term business performance,” the report said.