Businesses battle rising costs as confidence weakens in January

Nigeria’s business environment faced escalating headwinds in January, as tax reform-induced rising operational costs and weak consumer demand slowed economic activity to its lowest pace in six months, according to the latest Business Confidence Monitor released by the Nigerian Economic Summit Group yesterday.

The NESG’s Current Business Performance Index dropped to 105.8 points in January from 112 points in December 2025, marking the weakest business performance since July last year. While the index remained in expansion territory above the 100-point threshold, the sharp deceleration signals growing concerns among business leaders about the operating environment.

The NESG’s report aligns with the January Stanbic Purchasing Manager Index (PMI), which suggested that business activities regressed into contractionary negative territory.

However, the Central Bank of Nigeria (CBN) PMI reported that business confidence experienced its 14th consecutive monthly expansion in January.

The sectoral breakdown of the NESG report revealed an uneven recovery across Nigeria’s economy, with two major sectors slipping into contraction territory.
Agriculture, which had posted strong growth in December at 112.9 points, declined to 99.5 points in January, falling below the expansion threshold.

Trade experienced an even more dramatic decline, crashing from 123.8 points to 92.7 points. Manufacturing and services sectors maintained expansion, but at a significantly weaker pace.
Manufacturing eased to 115.8 points from 117.9 points, while services declined to 102.1 points from 104.3 points in the previous month.

Only the non-manufacturing sector sustained a relatively stable expansionary trajectory.
The most alarming for business operators was the sharp escalation in the cost of doing business, which surged to 90.5 points in January from 54.7 points in December, representing a 65 per cent increase. Input prices followed a similar trajectory, climbing to 96.9 points from 68.9 points over the same period.

The NESG attributed the elevated cost pressures to what it described as a “perfect storm” of new tax reforms, fuel price adjustments and lingering inflationary pressures.

The confluence of the factors has created a challenging environment for businesses trying to maintain profitability while managing consumer demand weakened by the post-festive season slowdown.

All key sub-indices measuring business health deteriorated in January compared to December. The general business situation, production levels, demand conditions, investment appetite, financial conditions, supply orders, trade stockpiling, access to credit and cash flow all registered declines.

The survey identified several critical challenges constraining business operations, including limited access to finance, irregular power supply, and rising commercial property costs. These structural impediments have dampened investment appetite and deteriorated business performance across multiple sectors.

The timing of the business confidence decline raises questions about the immediate impact of recent policy changes on the real economy. The introduction of new tax reforms, combined with fuel price adjustments, appears to have compounded existing cost pressures faced by businesses still grappling with elevated inflation.