Nigerian businesses are grappling more with a high interest rate than insecurity or insufficient power supply, according to a survey carried out by the Central Bank of Nigeria (CBN).
The Business Expectation Survey (BES), conducted between June 16 and 20 with a sample size of 1,900 firms across various sectors, disclosed that high interest rates had a constraint index score of 75.6, marginally higher than insecurity and insufficient power supply with 75.2 and 74.3 scores.
Businesses point to these three factors as the major hindrances hurting profitability and limiting expansion in June, the survey stated.
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Other constraints included in the report are high taxes (73.2), financial problems (68.9), high bank charges (68.7), unfavourable economic climate (67.8), unclear economic laws (67.4), unfavourable political climate (62.5), and poor infrastructure (62.4).
“This suggests that business constraints are more focused on economic and financial risks than political challenges in the review period,” the report noted.
Due to the stubbornly high inflationary pressures, the CBN has continued to maintain a hawkish stance in a deliberate move to curb rising prices and lure in dollar inflows, which will ultimately shore up the value of the naira.
Monetary authorities hiked key benchmark interest rates by a cumulative 875 basis points to 27.5 percent and have since held it steady for the fourth consecutive time to better assess the country’s inflation outlook.
Still, Nigerian firms remain cautiously optimistic. The CBN’s June Business Confidence Index stood at 20.7 and is projected to rise to 41.3 over the next six months, driven by expectations of increased activity and better operating conditions.
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However, confidence varies by region: the South East posted the lowest score, 4.4, weighed down by high interest rates, while the North East showed the highest optimism, 37.1. Businesses also anticipate a stronger naira, even as they prepare for further borrowing cost increases.
The apex bank governor, Yemi Cardoso, emphasised the need for a high interest rate in a volatile macroeconomic environment. “High interest rates are painful. We all know that. We all recognize that, especially for the real sector. But interest rates are not just about affordability, they are also about credibility,” he said, at the National Domestic Investment Summit held in Abuja on Monday.
He cited the current monetary policy stance as evidence that Nigeria is ready and determined to restore macroeconomic balance, regain investors’ confidence, and defend the naira’s value.
