Research Document: NESG-Stanbic IBTC Business Confidence Monitor (November 2024)

Posted Wed, Dec 11, 2024 7:54 AM

While business activity showed some seasonal elevation, overall performance across most sectors in Nigeria remained weak in November 2024. The NESG-Stanbic IBTC Business Confidence Monitor's (BCM) Current Business Index showed a net balance of -2.74, which means that businesses are quickly adapting to the current economic situation while taking advantage of the usually busier times of the year. A sub-sectoral analysis highlighted broadly subdued outcomes, with negative performance noted in Manufacturing (-3.65), Non-manufacturing (-3.62), and Services (-2.08). Meanwhile, modest and weak positive business performance were observed in Agriculture (+1.17) and Trade (+0.32) sectors.

Structural challenges in Nigeria’s business environment persist, driven by growth- limiting economic conditions. Elevated inflation and a depreciating local currency have kept operational costs and consumer prices significantly high. The Cost of
Doing Business Index surged by +51.50, while the Prices Index fell to -32.05, reflecting mounting pressures. The Central Bank of Nigeria’s (CBN) recent hike in the Monetary Policy Rate (MPR) has further exacerbated credit costs, placing additional strain on businesses. Despite opportunities for expansion this quarter, access to credit saw only marginal improvement, with fewer firms seeking funds due to prohibitive borrowing costs.

The most pronounced negative impacts were observed in reduced investment (-9.00) and exports (-4.52), both of which severely hindered overall business activity. Businesses cited frequent power shortages as the most critical challenge in
November 2024, with many firms relying on expensive alternative energy sources, compounded by already high fuel costs. Current fuel prices have failed to alleviate the burden on businesses, despite improved demand conditions (+5.38) and
production growth (+10.20).

Moreover, exchange rate instability has driven up import costs, adversely affecting profitability and pricing strategies. Limited access to financing remains a significant structural barrier, further constraining business performance in November 2024.