High Costs, Naira Volatility Dim Optimism In Services, Trade Sector
The services and trade sector showed least optimism in business improvements as high operating cost and naira depreciation hampered its growth, based on a survey report by the Nigerian Economic Summit Group (NESG), supported by Stanbic IBTC.
The NESG-Stanbic IBTC Business Confidence Monitor (BCM), highlighting the business conditions in December 2024 stated that a sub-sectoral analysis revealed broadly subdued outcomes, with a negative performance recorded in Services (-3.46), and Trade (-5.59).
“Services (+2.79) and Trade (+8.07) sectors expressed more restrained optimism regarding business improvement,” the NESG report stated.
“Among sectors, Non-manufacturing industries exhibit the highest optimism with an index of +40.19, while Services, at +2.79, show the least confidence in the future performance,” the report said.
In December 2024, the services sector continued to face substantial challenges, as evidenced by the Services Business Confidence Monitor (BCM) index, which stood at -3.46 points.
“This figure, slightly lower than November 2024’s -2.10, highlights a continued decline in business performance,” it said while revealing that the downturn reflects persistent operational difficulties amid elevated uncertainty.
The report stated that the key factors driving these challenges in the Services sector include escalating operational costs, driven by surging energy prices, exchange rate depreciation, and increased logistics expenses.
“These rising costs continue to erode business competitiveness, limiting firms’ ability to withstand shocks and sustain profitability,” it said.
The NESG-Stanbic IBTC Trade BCM index declined to -5.59 in December 2024, indicating a significant drop in business performance from +0.32 in November 2024 and signaling mild outcomes for the sector.
“The sector’s improved performance was largely driven by its strong capacity to generate employment, particularly within the informal segment, reaffirming its position as one of Nigeria’s largest employers,” the report stated.
It however noted that the sector’s positive outcomes remain below potential due to persistent challenges such as limited access to credit, high borrowing costs, strained cash flows, and elevated prices.
“Wholesale businesses were largely exposed to hurdles limiting business growth, while retailers remained more resilient due to their smaller operational scale,” the report said.
The NESG-Stanbic IBTC Future Business Expectation Index stood at +28.61, reflecting cautious optimism across sectors about the future business environment which represents a decline from +33.17 in November 2024, signaling a slight drop in business sentiment.
It further stated that the Services (+2.79) and Trade (+8.07) sectors displayed cautious optimism, while Manufacturing (+23.15), Non-manufacturing (+40.19), and Agriculture (+35.58) indicated stronger but still moderate confidence in short-term business performance.
“Notably, sentiment improvements were consistent across all sectors, similar to trends observed in November 2024,” the report said.
The report stated that expectations around prices, demand, investment, and financial performance remain pivotal to the cautiously optimistic outlook for business performance in the first quarter of 2025.
“However, ongoing concerns over rising inflation, high interest rates, and weakened purchasing power continue to weigh on business confidence,” The NESG-Stanbic IBTC report stated.
