Firms in Nigeria tell CBN insecurity their biggest headache

A survey conducted by the Central Bank of Nigeria (CBN) has revealed that insecurity is the primary factor constraining business activities in the country during July 2024.

The survey, which encompassed responses from 1,600 firms across various sectors such as manufacturing, construction, energy, and services, highlighted several critical challenges facing Nigerian businesses.

In addition to insecurity, firms cited high interest rates, insufficient power supply, multiple and high taxes, extortion, and corruption as significant impediments to their operations. These factors collectively create a challenging environment for businesses striving to grow and sustain their activities in Nigeria.

“Respondent firms indicated various factors limiting their businesses in the current month, with insecurity being the highest factor followed by high interest rate, insufficient power supply, high/multiple taxes and extortion and corruption,” CBN said.

The survey also shed light on businesses’ expectations regarding the Nigerian naira. Companies anticipate a decline in the naira’s value from now until December 2024, although there is optimism for a rebound in the following year.

Specifically, respondents expect the naira to depreciate over the next month and the subsequent three months, but they foresee an appreciation within six months. This outlook was detailed in a report published by the CBN on its website, based on data collected in the third week of July.

Since June 2023, when the naira was allowed to trade more freely in an effort to boost investor confidence, it has depreciated by approximately 70% against the US dollar.

This significant loss in value has had a profound impact on companies with dollar-denominated obligations. For example, MTN Group Ltd., Nigeria’s largest mobile operator, has experienced substantial losses as their liabilities have increased in naira terms due to the currency’s devaluation.

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The CBN’s business expectations survey is a monthly initiative aimed at gathering insights from leading firms across various sectors. By resuming the publication of this report alongside other economic indicators, the central bank seeks to enhance public access to crucial data and promote transparency within the Nigerian economy.

The survey highlighted that businesses perceive the current inflation rate of 34.19% as excessively high, referencing June’s inflation data.

However, recent figures released last week indicated a slight improvement, with the nation’s annual inflation rate slowing to 33.4% in July 2024. This marks the first deceleration in inflation in nearly two years, providing a modest respite for businesses grappling with high costs.