Business in Nigeria are groaning under the high cost of doing business, as statistics showed that 70 per cent of total operation costs are spent on electricity, including alternative power, rent and logistics.
Also, 52.78 per cent of businesses said they anticipate no relief from high operational costs by the end of this quarter and this pessimism is primarily driven by three critical external pressures: exorbitant energy costs, crippling logistics inefficiencies and rising government taxes.
This data is according to the Lagos Chamber of Commerce and Industry (LCCI) Cost of Doing Business Monitor (CDBM).
The CDBM put the cost of doing business index for Q3 at 72.4 and even though very high, it is a decline from 77.7 recorded for Q2.
The Monitor, which ranges from 0 (minimal cost burden) to 100 (severe cost burden) with a mid-point at 50, serves as a diagnostic tool for identifying structural constraints impeding sectoral productivity and private investment.
The cost of doing business has remained a persistent concern for both domestic enterprises and foreign investors.
Despite various reform efforts aimed at improving the business environment, such as the enactment of the Business Facilitation Act, the creation of one-stop shops and the automation of regulatory services, businesses continue to face rising operational challenges.
These include but are not limited to poor infrastructure, unstable power supply, insecurity, multiple taxation, foreign exchange volatility and regulatory inefficiencies, among others.
Giving a sectoral breakdown, the monitor noted that the agricultural sector recorded an upward trend in costs, rising from 65.7 in Q2 2025 to an average of 76.4 in Q3 2025.
A detailed look at the quarterly performance revealed a notable development despite remaining in the high-cost burden region; the sector experienced a significant monthly decline from 85.3 in July to 70.4 in September.
This cost relief is largely attributable to a reduction in regulatory fees paid by farmers. While the average number of regulatory fees paid remained at three per month, the direct cost of these fees decreased by September.
However, overarching challenges persisted throughout the quarter, according to the data.
Costs related to electricity, logistics and acquiring land or premises remained a significant burden.
The LCCI-CDB index for the manufacturing sector, however, showed a slight increase, rising from 76.57 in Q2 2025 to 77.59 in Q3 2025, a more than one per cent increase in cost.
Covering core manufacturing, mining and solid minerals and the oil and gas sub-sectors, a deeper analysis reveals significant variation in cost performance among the sub-sectors in the quarter under review.
While costs rose in the oil and gas and core manufacturing industries, the mining and solid minerals sub-sector saw a substantial 22 per cent drop in costs.
The report attributed the reduction to two key factors – lower spending on alternative power and reduced regulatory fees.
It further noted that the subsector paid an average of three regulatory fees, significantly less than the oil and gas subsector, which paid an average of seven fees.
In contrast, it further revealed, the oil and gas industry remained under intense cost pressure, with over 54 per cent of its expenses going to alternative power, security, regulatory costs and logistics.
Companies within the broader manufacturing sector spent about 40 per cent of their expenses on electricity, raw materials and office consumables and repairs.
The rising costs in these key areas explained the overall slight increase in the sector’s index for the quarter.
The services sector recorded its lowest business costs in Q3 2025, despite persistent economic headwinds.
The LCCI-CDB index for the sector fell to 70.27, down from 79.75 in Q2 2025. This improvement it is noted, was driven by relative gains in key subsectors and a more favourable macroeconomic environment, characterised by moderating inflation and FX stability.
The report noted that although most service sub-sectors remained in the high cost burden region, only four fell below the 70-index point threshold, indicating a modest drop in costs compared to Q2.
Notably, ICT, media and entertainment and FMCG/Trade experienced cost reductions, though they remained in the high-burden zone.
Overall, the sector continues to allocate over 30 per cent of its expenditure to three primary cost drivers: electricity, rent and employee remuneration.
“The persistently high cost of doing business, as reflected in the CDBM, poses significant challenges for enterprises across all sectors.
“These cost pressures undermine business viability, weaken competitiveness and limit growth potential,” it said.
Decrying galloping electricity costs, which surged by 80.43 per cent, businesses said the sharp increase in the last quarter was unbearable, forcing operating costs through the roof.
According to the over 200 businesses surveyed, more than 57 per cent of businesses reported higher electricity costs compared to previous quarters.
Only 4 per cent experienced reductions, while about 15 per cent saw no change, painting a bleak picture of mounting financial pressure on households and businesses.
This sustained upward trend in power expenses threatens to erode Nigeria’s economic competitiveness and exacerbate inflationary pressures across sectors.
A startling assessment of Lagos’ power sector reveals only 28.56 per cent of consumers consistently receive the electricity they pay for, while 48.08 per cent report outright service denial and 23.35 per cent remain uncertain about their supply.
However, businesses reported a 54 per cent increase in the cost of alternative energy as 51.53 per cent of business owners revealed that they rely completely on diesel/petrol generators to power their operations.
