Nigeria records huge decline in business confidence – report

Nigeria has experienced a huge decline in business confidence due to currency volatility and fuel subsidy removal, a new report has revealed.
The report by Standard Bank’s Africa Trade Barometer revealed that concerns are growing among investors over high taxation, especially as inflation persists across all markets.

The Africa Trade Barometer is an annual publication that evaluates the business landscape across 10 African countries. It analyses factors such as macroeconomic stability, trade openness, access to finance, and infrastructure to provide insights into business conditions across the continent.
The report, which surveyed 2,258 businesses across 10 African countries, stated that Nigeria reported increased operational costs, especially in logistics, making it harder for businesses to maintain profit margins.

The report stated that five countries saw increased business confidence, while three remained unchanged, two experienced declines.
According to the report, Ghana recorded the most significant improvement in business confidence index, jumping from 47 to 55 which was driven by expectations of stronger economic growth and improved forecasts for 2024 and 2025.

“Countries such as Uganda, Ghana, Tanzania, Angola, South Africa and Nigeria are expected to see improvements in real GDP growth in 2024 and into 2025.”

The report reads in part: “Nigeria saw the most significant decline, with confidence dropping due to currency volatility and the removal of fuel subsidies, leading to inflation and higher living costs.

“Overall, optimism about business growth, customer demand, and economic recovery remains prevalent, with 80 per cent of surveyed businesses expecting revenue growth.

“However, concerns over high taxation and inflation persist across all markets, reflecting ongoing challenges as governments pursue fiscal reforms and debt management strategies.”

The Africa Trade Barometer stated that the Central Bank of Nigeria’s decision to liberalise the exchange rate system in June 2023 caused the naira to lose 36 per cent of its value, aggravating dollar shortages in the economy.

“As a result, businesses are struggling to access foreign currency needed for imports, leading to increased operational costs and disruptions in cross-border trade,” it stated, adding that many businesses have also faced difficulties obtaining trade credit due to the currency instability, creating liquidity constraints.

It stated: “Nigeria experienced the largest decline in business confidence among surveyed businesses. This was primarily due to the significant depreciation of the naira.

“The primary driver of this was the liberalisation of the exchange rate by the central bank to consolidate the multiple exchange rate systems into a unified market. This aimed to let supply and demand dictate the rates, but in June 2023, the Naira fell further by 36 per cent on the official market, showing notable devaluation amidst dollar scarcity and market unrest.

“Efforts to stabilise the naira were further compromised by the removal and later partial reinstatement of the fuel subsidy, which had stoked inflation and sparked nationwide protests over increased living costs,” it stated.