Businesses stay optimistic, but rising costs continue to slow growth
Despite remaining in expansion territory, Nigerian businesses are grappling with high operating costs, weak credit access and slowing momentum.
Nigeria’s private sector continued to grow in June, but businesses are finding it increasingly difficult to sustain momentum as high operating costs, limited access to credit, poor infrastructure and insecurity continue to weigh on economic activity.
The latest Business Confidence Monitor released by the Nigerian Economic Summit Group (NESG) showed that business activity remained in expansion during the month, although the pace of growth has slowed compared with a year ago, reflecting the persistent structural challenges facing the economy.
The report showed that the Current Business Performance Index remained unchanged at 104.6 points in June, the same level recorded in May. Although the reading indicates that businesses are still expanding, it is significantly lower than the 113.6 points recorded in June 2025, suggesting that business confidence has weakened over the past year.
According to the NESG, manufacturers, farmers, traders and non-manufacturing firms all remained in expansion during the month, while the services sector slipped into contraction as economic pressures intensified.
The group said businesses continued to record growth across several key indicators, including production, customer demand, operating profit, financial performance, supply orders, cash flow, employment and access to credit. However, investment and export activities remained subdued, while inventory accumulation declined, signalling that many firms remain cautious about future demand.
Manufacturing maintained expansion with a Business Confidence Index of 106.4 points, although performance weakened from both the previous month and the same period last year. The slowdown reflected softer activities across segments such as food, beverages and tobacco, cement, plastics and rubber products, and basic metals, despite stronger performance in textile, apparel and footwear manufacturing.
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Agriculture returned to expansion after recording a Business Confidence Index of 103.9 points, improving from 97.5 points in May. The rebound was supported by early harvests and favourable rainfall, although livestock and forestry activities continued to experience challenges.
The non-manufacturing sector also recovered, posting an index of 106.8 points as stronger activity in construction and crude petroleum offset continued weakness in oil and gas services.
The services sector was the only major segment to contract during the month, recording an index of 98.5 points. The decline was driven by weaker performance across financial services, telecommunications, real estate and broadcasting.
Trade activities remained in expansion at 102.0 points, although wholesale trade slowed while retail activities contracted during the period.
The report attributed the slower pace of business growth to several long-standing constraints that continue to increase operating costs and reduce competitiveness. Businesses identified high financing costs, unreliable electricity supply, poor transport infrastructure, insecurity, rising rental expenses and regulatory uncertainty as major obstacles limiting investment, squeezing profit margins and slowing employment growth.
Limited access to affordable credit also remained a significant concern, particularly for manufacturers and small businesses seeking to expand operations or invest in new equipment. Despite these challenges, businesses expressed stronger optimism about the months ahead.
The NESG’s Future Business Expectation Index rose to 128.4 points in June from 127.0 points in May, indicating that firms expect business conditions to improve over the next one to three months.
According to the report, the improved outlook was partly supported by easing geopolitical tensions in the Middle East, which contributed to lower international crude oil prices and reduced uncertainty in global energy markets.
The findings suggest that while Nigerian businesses remain resilient and continue to expand, sustaining stronger growth will depend on addressing structural issues that have consistently raised the cost of doing business. Industry operators maintain that improvements in power supply, infrastructure, access to affordable finance and security will be critical if businesses are to translate their optimism into stronger investment, higher productivity and faster economic growth.
