Business confidence slows in May on power shortages, worsening insecurity

Nigeria’s business confidence index slowed in May on power shortages, worsening insecurity limiting agricultural output among other structural challenges that have limited expansion, according to NESG-Stanbic IBTC Business Confidence Monitor (BCM).

Despite the decline in the performance index, businesses experienced improvement buoyed by rising production levels, operating profit, cash flow, and employment for the fifth consecutive month.

“Nigeria’s business environment sustained its positive trajectory in May 2025, although with a slight moderation in momentum compared to previous months,” the report stated.

“Key constraints to business expansion in May 2025 included persistent power supply shortages, limited access to financing, high commercial lease and rental costs, inadequate foreign exchange availability, inconsistent economic policies, and worsening insecurity.”

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The report revealed that Africa’s most populous nation’s Current Business Index declined to +9.78 in May, down from +12.29 in April 2025, amounting for the reduction in the month under review.

A sectoral analysis revealed mildly positive outcomes across most sectors, except for Agriculture, which recorded a negative performance.

“Strong performances were noted in non-manufacturing (+22.19), followed by manufacturing (+14.43), trade (+14.13), and services (+4.49). In contrast, Agriculture posted a negative index of -1.77, primarily driven by existing structural issues, and amplified by the intensified impacts of climate change, including prolonged droughts, erratic rainfall, extreme heat waves, and shorter wet seasons,” the report added.

However, the report revealed that these sectors experienced a slowdown in performance, except manufacturing, which remained resilient, compared to April 2025. Similarly, the cost of doing business declined to +38.54 in May from +51.79 in April.

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“The most significant negative indicators were a sharp reduction in investment confidence (-25.61) and declining price levels (-18.15), contributing to slower business activity and growth during the month. Nigerian businesses have continued to witness a turnaround in their operations as key reforms, including the unification of the exchange rate has seen the naira more predictable than years before.

Firms are reporting FX gains and slowing cost pressures which is expected to improve expansion and general confidence in the economy. Business outlook for the near future revealed a slight increase from the figure posted in April 2025.

The Business Confidence Measure (BCM) posted a positive index of +32.44 from +28.04, reflecting expectations of improvement in the next one to three months.

However, risks remain. According to the report, rising inflation, high interest rates, and weak consumer purchasing power, could dampen the pace of economic recovery in the second half of 2025 despite the prevailing optimistic sentiment.