Onome Amuge
Nigeria began 2026 with a business environment under pressure, as higher operating costs and weakening demand dampened confidence across key sectors.
The latest Business Confidence Monitor (BCM) released by the Nigerian Economic Summit Group (NESG) shows that the Current Business Performance Index fell to 105.8 points in January 2026, down from 112.0 points in December. Although readings above 100 still indicate expansion, the drop marks the lowest level in six months and underscores mounting pressure on firms facing rising costs, constrained financing and persistent structural bottlenecks.
At the same time, business optimism about the near-term outlook moderated. The Future Business Expectation Index declined for a second consecutive month to 124.7 points, from 132.6 points in December.
Taken together, the data point to an economy stuck in a fragile equilibrium: not yet slipping into contraction, but increasingly weighed down by inflationary pressures, infrastructure deficits and political uncertainty ahead of elections.
Nigeria’s BCM is a survey-based indicator that captures qualitative assessments from business owners and senior managers across agriculture, manufacturing, services, trade and non-manufacturing industries such as oil and gas. An index reading above 100 signals expansion, while values below that threshold indicate contraction.
In January, only the non-manufacturing sector strengthened meaningfully, while activity slowed or deteriorated across most others. Agriculture and trade slipped into contraction, a reversal that reflects weak consumer demand and rising costs at the start of the year.
The slowdown follows a seasonal pattern often observed after the festive period, when consumption eases and inventories are run down. But this year’s deceleration has been amplified by a sharp rise in the cost of doing business. The BCM’s cost-of-doing-business index surged to 90.5 points, up from 54.7 points in December, while input prices climbed to 96.9 points from 68.9.
The agriculture sector, long seen as a potential engine of inclusive growth and employment, recorded its weakest performance since August 2025. The BCM index for agriculture fell to 99.5 points in January, from 112.9 points in December, pushing the sector into contraction territory.
The decline was driven primarily by setbacks in livestock and agro-allied activities, both of which slipped below the 100-point threshold. Crop production also slowed, while only fishing remained in expansion, albeit at a weaker pace.
Persistent insecurity across farming communities continues to disrupt production and logistics, particularly in the north of the country. Limited access to credit, unreliable electricity supply and poor rural infrastructure further constrain productivity and investment along agricultural value chains.
Manufacturing remained one of the more resilient sectors, with its BCM index easing only marginally to 115.8 points, from 117.9 points in December.
Textiles, apparel and footwear, along with cement, recorded robust growth, benefiting from domestic demand and, in cement’s case, infrastructure-related activity. Motor vehicle assembly and “other manufacturing” hovered around the neutral mark, reflecting fragile recovery.
However, several sub-sectors slipped into contraction, including wood and wood products and non-metallic products, while chemical and pharmaceutical products and plastic and rubber manufacturing recorded some of the steepest declines.
Manufacturers cite a familiar litany of constraints including erratic power supply, high energy costs, shortages of imported raw materials, currency volatility, insecurity along transport corridors and limited access to affordable financing. These challenges have driven up production costs and reduced capacity utilisation, undermining competitiveness.
The sector’s continued expansion, while encouraging, appears increasingly dependent on a narrow set of industries rather than a broad-based industrial revival.
In contrast, the non-manufacturing sector emerged as the strongest performer in January. Its BCM index rose to 115.3 points, from 110.2 points in December, marking a solid rebound from contraction a year earlier.
Growth was underpinned by improvements in crude petroleum and oil and gas services, both of which returned to expansion territory. This reflects a combination of improved operational conditions, stronger demand and better cash flow dynamics in parts of the energy sector.
However, growth moderated in construction and natural gas, suggesting that the recovery remains uneven. Structural constraints, including high rental costs, infrastructure deficits and energy shortages, continue to limit new investment, even in segments showing renewed momentum.
Given the centrality of oil and gas to Nigeria’s fiscal and external balances, the sector’s relative strength offers some reassurance. Yet its capital-intensive nature limits its ability to offset weakness elsewhere in terms of employment and broad-based growth.
The services sector remained in expansion territory, but its BCM index dipped to 102.1 points, from 104.3 points in December, indicating a fragile recovery.
Subdued consumer demand weighed on financial institutions, real estate, and telecommunications and information services, while professional, scientific and technical services was the only major sub-sector to record an improvement. Broadcasting and other services also remained resilient.
High operating costs, limited access to finance and weak digital infrastructure continue to constrain service providers, particularly small and medium-sized enterprises. While the sector has benefited from long-term structural shifts towards digitalisation and urban services, near-term conditions remain challenging.
The sharpest deterioration was recorded in trade, where the BCM index plunged to 92.7 points in January, from 123.8 points in December, marking a return to contraction.
Both wholesale and retail trade weakened, ending a multi-month expansion streak. Wholesale trade experienced the steeper downturn, reflecting inventory drawdowns, weak demand and persistent cost pressures.
Traders report rising transportation and storage costs, insecurity in key markets, frequent power outages and supply chain disruptions. With households facing elevated inflation and stagnant real incomes, discretionary spending has softened, amplifying pressures on the sector.
One of the most striking features of the January data is the increase in cost indicators. The rise in the cost-of-doing-business and input price indices reflects the cumulative impact of inflation, fuel price reforms and taxation changes.
While Nigeria has made progress in stabilising its exchange rate and rebuilding external reserves, inflation remains elevated, limiting purchasing power and complicating business planning. For many firms, especially smaller ones, rising costs have translated directly into reduced profitability and delayed investment.
Access to credit remains limited, with high interest rates and risk aversion among lenders further constraining expansion plans.
Despite these challenges, Nigerian businesses remain optimistic about the near-term outlook. The Future Business Expectation Index at 124.7 points still signals confidence, albeit at a reduced level.
Manufacturing recorded the strongest optimism, with an index of 155.0 points, followed by non-manufacturing at 140.0 points and trade at 137.9 points. Services (131.2 points) and agriculture (110.2 points) showed weaker optimism.
This confidence is conditional. Business leaders cite hopes of policy continuity, currency stability and stronger export demand as key supports. However, they also point to election-related uncertainty as a growing risk, with concerns that political pressures could undermine recent reforms.
The NESG notes that sustained optimism depends on avoiding policy reversals and deepening reforms that support macroeconomic stability, reduce inflation and improve the investment climate.
The art of doing nothing: Nigeria & The World