NESG-Stanbic IBTC BCM survey highlights decline in investment, exports

A recent survey conducted by the Nigerian Economic Summit Group (NESG) in partnership with Stanbic IBTC Bank’s Business Confidence Monitor (BCM) has unveiled a worrisome decline in investment and export activity in Nigeria. The findings underscore the pressing need for policy reforms and structural adjustments to revitalize the nation’s economy.

The survey paints a challenging picture of Nigeria’s business environment, with structural issues such as elevated inflation, a depreciating naira, and high operational costs weighing heavily on businesses. These factors have led to a significant surge in the Cost of Doing Business Index, which climbed by +51.50 in November 2024. Meanwhile, the Prices Index dropped to -32.05, indicating persistent pressure on profitability and consumer affordability.

The Current Business Index registered a net balance of -2.74, suggesting businesses are adapting to the challenging economic conditions but still struggling to achieve growth.

The report highlights broad declines across various sectors, with manufacturing, non-manufacturing, and services sectors recording negative business performances. Specifically: The index stood at -3.65, reflecting a mild decline in business activity. Despite some recovery from October’s -28.72, key sub-sectors such as Food, Beverage, and Tobacco and Chemical and Pharmaceutical Products showed weak performance.

However, sub-sectors like Cement and Plastic and Rubber Products posted modest positive results.

The index reached -3.62 in November, a marked improvement from October’s -28.16. Gains in sub-sectors like Natural Gas (+5.83) and Oil and Gas Services (+2.73) contributed to this rebound. However, sub-sectors such as Construction (-3.24) and Crude Petroleum (-21.79) continued to struggle.

According to the report, the sector remained under pressure, with an index of -2.08, reflecting ongoing operational difficulties and economic uncertainty.

While modest gains were recorded in the Trade BCM Index (+0.32), sub-sectoral performance was mixed. The Wholesale Sub-sector rebounded to +4.98, but the Retail Sub-sector lagged behind at -4.35.

One of the survey’s most concerning findings is the sharp decline in the Investment Index, which plummeted to -59.40. This reflects a significant lack of confidence in committing new resources to business expansion, particularly in non-manufacturing ventures. The report attributes this decline to prohibitive borrowing costs, exchange rate instability, and rising production expenses.

Similarly, export activity contracted significantly, with the Exports Index falling to -4.52. This downturn highlights the adverse impact of high import costs, exchange rate volatility, and logistical challenges on Nigeria’s trade performance.

The report identifies several structural barriers hampering business performance in November 2024: Businesses faced elevated costs stemming from rising energy prices, expensive logistics, and inflationary pressures.

“ Fluctuations in the naira’s value drove up import costs, negatively affecting pricing strategies and profitability. The Central Bank of Nigeria’s recent hike in the Monetary Policy Rate further constrained businesses’ ability to access affordable financing. The Access to Credit Index stood at -19.09, highlighting the impact of high-interest rates. Frequent power outages forced many businesses to rely on costly alternative energy sources, exacerbating operational challenges.

“Despite the challenges, some positive trends emerged. The general business situation index rose to +46.1, driven by increased production and demand ahead of year-end festivities. Anticipating price hikes, consumers engaged in panic buying, temporarily boosting revenues for businesses.

“The Production Index climbed to +10.20, while improved cash flow conditions and employment gains provided a silver lining for certain sub-sectors, “ it stated.

The NESG-Stanbic IBTC BCM report emphasizes the need for urgent policy interventions to address the structural issues limiting Nigeria’s economic potential. Key recommendations include: Reduce borrowing costs and stabilize the naira to encourage investment and export activity; Invest in reliable energy and logistics infrastructure to lower operational costs for businesses; Implement measures to improve access to affordable financing, particularly for small and medium-sized enterprises; Provide targeted support to struggling sectors like manufacturing and services to stimulate growth; enhanced Trade Policies: Strengthen export incentives and trade agreements to boost Nigeria’s international trade performance.

The NESG-Stanbic IBTC BCM survey serves as a critical barometer of Nigeria’s economic health, revealing both the challenges and opportunities within the business landscape. While businesses have demonstrated resilience and adaptability, addressing the underlying structural barriers is essential to unlocking sustained economic growth. Without timely and effective policy action, Nigeria risks further economic stagnation in an increasingly competitive global market.

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