
Business confidence in Nigeria has sharply declined due to the recent devaluation of the naira and the removal of fuel subsidies, according to the latest report from Standard Bank’s Africa Trade Barometer. This annual publication assesses the business environment across ten African nations, focusing on factors such as macroeconomic stability, trade openness, access to finance, and infrastructure.
The report, which surveyed 2,258 businesses, reveals that Nigeria experienced the steepest drop in business sentiment, exacerbated by volatile exchange rates and soaring inflation. While the average confidence index across the ten markets increased slightly from 58 in May 2023 to 59 in August 2024, Nigeria’s outlook has soured significantly.
“Nigeria recorded the most significant decline, with confidence dropping due to currency volatility and the removal of fuel subsidies, leading to inflation and higher living costs,” the report stated. In contrast, Ghana showed marked improvement in business confidence, climbing from 47 to 55, fueled by positive economic forecasts for 2024 and 2025.
The Central Bank of Nigeria’s decision to liberalize the exchange rate system in June 2023 resulted in a 36% depreciation of the naira, further complicating the economic landscape. Businesses are struggling to secure the foreign currency necessary for imports, which has led to increased operational costs and disruptions in trade.
Moreover, the removal of fuel subsidies has led to soaring fuel prices, driving inflation and diminishing consumer purchasing power. As a result, many Nigerian businesses reported rising operational costs, particularly in logistics, challenging their profit margins.
Despite these hurdles, the report indicates cautious optimism among businesses, with 80% of respondents expecting revenue growth. However, concerns over high taxation and persistent inflation remain prevalent as governments grapple with fiscal reforms and debt management.
The Stanbic IBTC Purchasing Managers’ Index (PMI) for September reflected continued struggles in the Nigerian economy, registering a reading of 49.8, indicating contraction for the third consecutive month. In contrast, the Central Bank of Nigeria’s PMI showed a more optimistic picture, with a composite index of 50.7, suggesting expansion in economic activities for the second month in a row.
Looking ahead, the report suggests that nations like Uganda, Ghana, Tanzania, Angola, South Africa, and Nigeria are projected to see improvements in real GDP growth by 2024 and into 2025, contingent upon the stabilization of macroeconomic conditions.