In January 2025, the Nigerian business environment saw a reduction in operating costs, primarily due to the stability of the naira and a slowdown in price increases. According to a report from the Nigerian Economic Summit Group (NESG), in collaboration with Stanbic IBTC, the cost of doing business index dropped from +50.32 in December to +47.58 in January, indicating a relief from earlier pressures on business growth. The stability in the naira and the moderation of consumer prices contributed to a slower rise in both operational costs and consumer prices, providing businesses with a more stable environment.
The naira’s renewed strength, bolstered by the Central Bank of Nigeria’s (CBN) introduction of the Electronic Foreign Exchange Matching Systems (EFEMS) and the FX code, has seen the naira hover around N1,500 to N1,520. This development has offered businesses some hope, making it easier to plan and reducing uncertainty in the currency market. The stability has also reduced the volatility that previously plagued businesses, allowing for more predictable financial strategies.
Consumer prices showed signs of moderation in January, with a slight decrease in the month-on-month rise despite a slight increase in headline inflation from 34.6% in November to 34.8% in December 2024. While inflation remains high, the stabilization in consumer prices has provided some relief to businesses and households. The expected decline in prices, thanks to the rebasing of the Consumer Price Index (CPI), may offer further breathing space for businesses in the coming months.
Increased commercial activity at the beginning of the year was driven by improved access to credit, which rose by 31.98%. However, businesses are still facing challenges, such as high financing costs, power shortages, limited foreign exchange availability, and restricted access to finance. These factors have hindered business growth, leading to only weakly positive outcomes in key areas such as general business conditions and production levels.
Despite the naira’s stability, the high exchange rate against major currencies and rising import costs continue to erode profitability for businesses. Companies are finding it increasingly difficult to adjust pricing strategies due to the impact of currency fluctuations and import cost increases. These ongoing challenges remain significant obstacles to business expansion and long-term growth in the Nigerian economy.
Source: BUSINESS DAY