Nigerian businesses anticipate a slight decline in loan borrowing costs over the coming three months, even though the Central Bank’s latest Business Expectation Survey shows firms experienced elevated rates through July.
According to the CBN report, “Respondents expect borrowing rates to remain elevated across the same periods, as indicated by the consistently positive borrowing rate indices. The relatively stable indices, fluctuating around 18-19 points, suggest expectations of a marginal decrease in borrowing costs over the near to medium term.” The framing suggests businesses aren’t expecting dramatic relief, but rather a gradual softening from current levels.
Beyond borrowing costs, the survey paints a broadly optimistic picture of business sentiment. The Business Confidence Index came in at 5.7 points, reflecting continued positive outlook among formal businesses regarding the macroeconomic environment. That optimism, according to the CBN, is driven primarily by increased demand, cited by 22.3 percent of respondents, followed by economic diversification at 21.4 percent and improved access to finance at 15 percent. On the flip side, businesses expressed more guarded views shaped by inflation concerns, cited by 27.7 percent, alongside insecurity at 22.4 percent, ongoing energy-related challenges at 23.4 percent, and elevated geopolitical uncertainty at 16.5 percent.
Looking further ahead, the CBN said confidence remains strong across all sectors over the next six months, with positive sentiment indices maintained throughout the review period despite the near-term headwinds businesses continue to navigate.
When asked to identify their biggest operational challenges, businesses ranked high or multiple taxation as the top constraint at 70.8 points, followed closely by insecurity at 69.7 and high interest rates at 66.3. An unfavourable political climate came in at 62.2, while high bank charges registered at 62.0. Further down the list, competition and unclear economic laws scored 61.1 and 58.4 respectively, still notable concerns even if less pressing than the top constraints. Financial constraints and poor infrastructure rounded out the bottom of the top ten at 56.6 and 55.1, indicating these remain relevant factors even though businesses rank them as comparatively less burdensome.
On the question of growth, the electricity, water, and gas sector reported the strongest expansion outlook among all sectors surveyed, posting an index of 85.7 points. Employment expectations painted a more mixed picture for August, with hiring sentiment generally cautious across most sectors, though the Mining and Quarrying sector stood out as the most optimistic when it came to plans for new hires.
