Rising costs, power shortages drag Nigeria’s business growth — NESG

By: Amarachi Okonkwo 

Nigeria’s business environment continued to expand in March 2026, but momentum weakened as rising input costs, persistent power supply shortages, and broader structural constraints weighed on overall performance, according to the latest Business Confidence Monitor (BCM) released by the Nigerian Economic Summit Group (NESG).

The report showed that the Current Business Performance Index fell to 101.2 points in March, down from 117.2 points in February and 106.6 points in March 2025, indicating a slowdown in economic activity across key sectors, even though conditions remain in expansion territory above the 100-point benchmark.

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According to NESG, the decline reflects mounting pressure on businesses from limited access to finance, frequent power outages, insecurity, and high rental and operating costs, all of which continue to constrain productivity and profitability.

Manufacturing, trade, services slow but remain in expansion

A sectoral breakdown revealed uneven performance across the economy. Manufacturing, trade, and services all remained in expansion territory but recorded slower growth compared to the previous month.

Manufacturing activity eased significantly to 103.4 points from 121.1 points in February, with sub-sectors such as cement, plastics and rubber, and wood products slipping into contraction.

NESG attributed the slowdown to raw material shortages, infrastructure bottlenecks, and constrained access to credit, which have increased production costs and compressed profit margins.

Similarly, the services sector posted a weaker expansion of 104.7 points, supported by steady demand and improved financial conditions, but weighed down by rising operational expenses and subdued investment activity.

The trade sector also expanded at 103.8 points, though at a slower pace. While retail activity remained relatively resilient, wholesale trade slipped into contraction, reflecting supply chain disruptions and financing challenges.

Non-manufacturing and agriculture in contraction

In contrast, both the non-manufacturing and agriculture sectors recorded contractions.

The non-manufacturing index dropped sharply to 98.4 points from 128.9 points in February, driven by weaker performance in oil and gas services and related subsectors.

Agriculture declined further to 91.1 points, reflecting weakening crop production and livestock output amid insecurity, limited financing, and infrastructural deficits that disrupted production cycles and discouraged investment.

Investment activity weakens amid uncertainty

One of the most concerning trends highlighted in the report is a deepening contraction in investment activity, as businesses scaled back expansion plans due to heightened macroeconomic uncertainty and structural challenges.

According to NESG, high input costs, unreliable energy supply, and insecurity have significantly reduced investor appetite for new projects and capital commitments.

Although the overall cost of doing business showed a slight easing to 59.7 percent from 65.2 percent in February, operational expenses remained elevated, continuing to erode profitability across sectors.

Key indicators, including export performance, operating profit, and supply orders, also slipped into contraction, signalling weakening business conditions during the month.

Outlook remains cautiously optimistic

Despite current challenges, Nigerian businesses remain cautiously optimistic about short-term prospects.

The Future Business Expectations Index stood at 128.0 points in March, down from 135.4 points in February, reflecting slightly reduced but still positive confidence for the next one to three months.

Optimism is strongest in the manufacturing and trade sectors, while agriculture and services show weaker expectations.

However, NESG warned that the outlook remains exposed to emerging global risks, particularly rising energy costs linked to geopolitical tensions in the Gulf region, which could further increase production and transportation expenses.