Nigeria’s economic recovery is encountering a new challenge just as business activity gathers momentum, with surging operating costs threatening to derail fresh investments and weaken corporate confidence despite broad-based expansion across key sectors of the economy.
The latest Business Confidence Monitor (BCM) by the Nigerian Economic Summit Group (NESG) shows that the Current Business Performance Index rose to 108.6 points in July, up from 104.6 points in June and 105.4 points in the corresponding period of 2025, indicating stronger economic expansion. The improvement was led by non-manufacturing industries, while every major sector, including services, recorded expansion during the month.
The report shows that while companies expanded production, improved profitability, and recorded stronger demand in July, many are holding back on new investments as rising energy costs, expensive financing, inadequate infrastructure, and insecurity continue to squeeze margins.
It reveals a growing disconnect between improving business performance and companies’ willingness to commit capital. This trend, economists say, could determine whether Nigeria’s nascent economic recovery gathers momentum or loses steam.
“Although production, operating profits, financial results, employment, demand conditions, and supply orders all strengthened during the month, investment remained in contraction, highlighting businesses’ reluctance to expand amid worsening cost pressures. Access to credit also weakened slightly, reinforcing concerns that financing remains a major obstacle to corporate growth,” it said.
The findings suggest that while President Bola Tinubu’s macroeconomic reforms are beginning to stabilise business activity, structural challenges continue to discourage long-term investment.
NESG identified limited access to finance, energy shortages, rising commercial property rents, insecurity, and poor infrastructure as the principal constraints weighing on businesses.
The report noted that these factors continue to elevate operating costs, reduce profitability and delay expansion plans across industries.
The pressure is becoming increasingly visible across Corporate Nigeria.
Manufacturing, one of the country’s largest employers, remained firmly in expansion territory, with its Business Performance Index rising to 110.5 points from 106.4 points in June.
“The sector has staged a remarkable turnaround from 98.0 points recorded in July last year, driven by stronger activity in cement, textiles, apparel and footwear, as well as chemical and pharmaceutical products,” the report disclosed.
However, manufacturers warned that growth continues to be constrained by tightening credit conditions, irregular electricity supply, shortages of raw materials, inadequate infrastructure and escalating rental costs.
Several manufacturing subsectors, including plastic and rubber products, non-metallic products, pulp and paper, and motor vehicle assembly, remained in contraction, underscoring the uneven nature of the recovery.
Outside manufacturing, the strongest momentum came from Nigeria’s non-manufacturing economy.
The sector’s Business Performance Index accelerated to 116.6 points, the highest among all sectors, supported by stronger activity in crude petroleum, natural gas and oilfield services.
Yet businesses in the sector also cited power outages, rising rental expenses and infrastructure deficiencies as factors increasing operating costs and discouraging new investments.
Agriculture also recorded stronger expansion, with its Business Performance Index climbing to 110.8 points from 103.9 points in June, supported by favourable rainfall and improved crop production.
Despite the stronger performance, operators continued to identify insecurity, weak infrastructure, energy shortages and poor access to finance as major constraints preventing greater investment in the sector.
The services economy also returned to expansion after contracting in June.
The sector’s performance index rose to 108.3 points, supported largely by stronger activity among financial institutions, real estate firms and professional services companies.
NESG attributed part of the improvement to stronger corporate earnings within the financial services industry.
However, telecommunications and information services slipped back into contraction, while operators across the sector continued to struggle with power cuts, regulatory uncertainty, high rental costs and weak access to credit.
Trade activity remained positive but relatively subdued. The Trade Business Performance Index edged up to 102.8 points from 102.0 points in June, reflecting only marginal growth in wholesale and retail trade.
According to NESG, limited access to finance, energy shortages, logistics bottlenecks and regulatory constraints continue to suppress stronger expansion within the sector.
While businesses continue to expand, executives are becoming increasingly cautious about what lies ahead.
NESG’s Future Business Expectations Index eased marginally to 128.3 points in July from 128.4 points in June, indicating that optimism remains positive but is beginning to soften.
Trade and manufacturing businesses expressed the strongest confidence about the coming months, while agriculture and services were markedly less optimistic.
The report attributes the more cautious outlook to concerns over renewed cost pressures, particularly the potential impact of Dangote Refinery’s shift toward dollar-denominated petrol pricing, which businesses fear could keep energy costs elevated in the months ahead.
The latest survey highlights a critical turning point for Nigeria’s economy. Corporate activity is recovering, output is rising and most sectors have returned to expansion territory. Yet the sustainability of that recovery will depend less on demand than on whether policymakers can reduce the cost of doing business.
“Without cheaper financing, improved electricity supply, better infrastructure and lower energy costs, businesses may continue to postpone the investments needed to create jobs, expand production and sustain economic growth,” the NESG report added.
