Business confidence rises as inflation squeeze remains sever

Nigeria’s economic recovery is beginning to improve business sentiment, but the gains are yet to translate evenly across the population, with companies growing more optimistic about demand while low-income households continue to bear the heaviest burden of rising prices.

The Central Bank of Nigeria’s latest surveys show that the Business Confidence Index (BCI) rose sharply to 14.8 points in August from 5.7 points in July, while businesses expect confidence to climb further to 36.1 points by February 2027.

The improvement suggests that companies are beginning to see stronger prospects for sales and economic activity, following months of pressure from high operating costs, weak purchasing power and expensive financing.

Respondents attributed the August improvement largely to increased demand, which accounted for 25.9 per cent of the positive sentiment, followed by economic diversification at 18.3 per cent and monetary policy at 14.2 per cent.

The recovery in sentiment was broad-based. Industry recorded the greatest improvement, rising from 11.5 points in July to 17.1 points in August, while Services jumped from 3.6 to 13.3 points and Agriculture from 3.4 to 13.9 points.

Businesses also posted stronger expectations for orders and activity, with the Volume of Total Orders index at 20.3 points and the Volume of Business Activity index at 19.7 points. Construction recorded the highest expansion outlook at 73.9 points, while Electricity, Gas and Water Supply had the strongest current-operating confidence at 50 points.

But the improving corporate outlook is running ahead of the experience of many Nigerian households.

The CBN’s Inflation Expectations Survey showed that 64.3 per cent of respondents perceived inflation as high in August, although this was lower than 66.3 per cent in July. The income gap was particularly striking: 68.4 per cent of respondents earning below N70,000 perceived inflation as high, compared with only 30.8 per cent among those earning above N450,000.

The figures highlight the uneven nature of Nigeria’s economic recovery. While firms are becoming more confident about demand, households at the lower end of the income scale continue to have significantly less capacity to absorb higher prices for food, energy, transportation and other essentials.

Inflation perception was also higher among rural respondents, at 65.7 per cent, compared with 63.2 per cent in urban areas. Businesses were more exposed to the cost squeeze than households, with 60.1 per cent reporting higher expenditure as a result of inflation, compared with 51.9 per cent of households.

The CBN surveys further show that businesses are still dealing with substantial obstacles. High or multiple taxation was the biggest constraint, with an index of 67.8 points, followed by insecurity at 66.9 points and high interest rates at 63.5 points. High bank charges, competition, unclear economic laws and poor infrastructure also featured prominently.

Financing remains a particular concern. Businesses expect borrowing costs to remain relatively high, with borrowing-rate indices staying around 18-19 points across the various outlook periods.

Capacity utilisation meanwhile remained almost unchanged, edging down from 55.9 per cent in July to 55.8 per cent in August, suggesting that improved sentiment has yet to produce a major increase in the use of existing productive capacity.

The latest business confidence reading nevertheless reinforces signs of improving economic activity. The National Bureau of Statistics reported real GDP growth of 4.43 per cent year-on-year in the second quarter of 2026, while headline inflation eased to 15.43 per cent in July from 15.91 per cent in June.

The challenge for policymakers now is to ensure that stronger business expectations translate into higher production, investment and employment while bringing down the cost pressures that continue to erode household purchasing power.

A recovery in which companies expect stronger orders but millions of lower-income Nigerians remain overwhelmed by prices would signal improving macroeconomic stability without yet delivering broad-based economic relief.