NESG Report: Nigeria’s Business Environment Shows Significant Decline in 2024

The inaugural edition of the Nigeria Economic Society Group (NESG) report titled “Business Confidence Monitor: Gauging the Pulse of Nigeria’s Business Environment” has declared that Nigeria’s current business performance from January to September 2024 showed that the country’s business operating environment is largely negative, as underlying business and economic challenges have upscaled significantly.

According to the report, most businesses faced significant hurdles that limited their growth performance.

It stated: “The current business performance index (January – September 2024) was -11.13, indicating a decline in business activities compared with the same period of 2023”

It said that the -11.13 indicated “a mild negative business performance among businesses due to tightening state of economic activities and reduced demand conditions.”

The report, which was produced by the NESG with the support of the Stanbic IBTC Bank, said that on average, most businesses across sectors performed poorly in the first nine months of 2024.

It further stated that beyond the various economic inertia that dominated the business environment in 2024, the sub-sectoral results showed an uneven degree of negative business mood performance during this period.

It stated that the country’s business operating environment is largely negative, as underlying business and economic challenges have amplified significantly.

The largest negative contributions to the current business condition were from higher prices (-26.14) and constrained access to finance (-21.14), which affected business cash flow (-1.02) and employment (-3.96).

The weak production level and poor demand conditions also restrained economic activities and contributed significantly to Nigeria’s business climate.

“While drastic intervention and reforms by the government in the FX market has improved liquidity and stability, businesses continue to grapple with poor credit access. Consequently, this led to higher input costs of production,” the BCM said.

BCM indices ranged from -100 to +100 percentage points. An index with a positive net balance would suggest that businesses are more confident about prospects and that economic activities will likely gather more strength. In contrast, a negative index relates to the opposite.

The report stated that the weakest performance is notable in the agriculture sector (-22.22), followed by Trade (-13.21) and Manufacturing (-6.07) while non-manufacturing (-5.21) and Services (-2.58) had the least negative business conditions.

According to the report, the main obstacles were the high prices (-26.14), limited access to credit (21.14), constrained cash flow (-1.02), poor demand condition (-29.73), the elevated cost of business (+47.64) and reduced production activities (14.70).

It noted that limited availability of foreign exchange, inadequate power supply, limited access to finance and insecurity were the major challenges in the period.

It stated that “the biggest contributor to negative business performance in the period under review is Cost of Doing Business +47.64.”

Concerning future expectations, the BCM revealed a positive index of +26.86, indicating moderate optimistic expectations of business performance improvement.

Optimistic expectations are driven by the anticipated higher business activities from an uptick in investment, export performance, demand conditions, cash flows and employment.

“The services sector (+2.54) is the least optimistic, and the non-manufacturing sector is the most optimistic (+30.54) about the future.”

It added: “The optimistic outlook, though at a cautious level, was consistent across the five economic sectors covered.

Sector indices were +30.54 for non-manufacturing; +24.46 for Trade; +23.87 for Agriculture; +21.28 for Manufacturing, and +2.54 for Services.

“Majority of businesses expect improved general business conditions and production levels while financial conditions, supply orders and prices are expected to retrogress in the near term.”

The BCM said that based on the responses from firms surveyed across the trade, agriculture, manufacturing, non-manufacturing, and services sectors, there is an indication that economic activities would continue to experience fragile recovery and constrained business momentum over the next few months.

However, this current business condition does not deter managers and business executives from planning output expansion in the coming months, as expressed by 35.7 per cent of firms surveyed.

Despite the dominant poor state of the business environment in the current period, the optimism of business managers regarding the short-term outlook outweighs their experience in the first nine months of 2024.

The future expectation index settled at +26.86, resulting from moderate optimism in only one of the five sectors – non-manufacturing (+30.86), and a dominating cautious optimism in other sectors.

This suggests that business and economic activities will witness a fragile bounce-back from the current condition motivated by higher seasonal productive activities in the fourth quarter of every year.

Regarding the leading indicators, the general business situation (+27.11), production (+37.50), investment (+44.88) and operating profit (+28.91) are expected to experience improvement in the next one to three months.

In addition, high prices will hamper cash flow and employment in Trade, Agriculture and Manufacturing sectors, across the business sectors of the Nigerian economy.

Dike Onwuamaeze

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