Victor EzejaAs businesses across Nigeria struggle to survive, insecurity and high interest rates have been identified as major factors hampering their growth.
This was revealed in a Central Bank of Nigeria (CBN) survey report. The CBN’s Business Expectation Survey, conducted between 15th and 19th July 2024, sampled 1,600 respondents from businesses across the country in three sectors- Agriculture, Industry, and Services.
Join our WhatsApp ChannelAccording to the report, respondent firms indicated that apart from insecurity and high interest rates, other factors constraining business activities within the period under review (July) included insufficient power supply, high/multiple taxes, extortion and corruption.
Nigeria has continued to witness insecurity in different parts of the country. These forms of insecurity pose a significant threat to the survival of business activities and consequently, have a severe negative impact on the country’s economy.
Many farmers have been driven away from their homes and farmlands by bandits, leading to disruption of agricultural activities, a leading cause of food scarcity and inflation in the country. Insecurity also deters investments in vital sectors that could boost economic growth. The security crisis in the northern part of Nigeria has, according to a report by the International Crisis Group, led to the death of over 8,000 people since 2011, and displaced over 200,000.
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High interest rate as indicated in the CBN survey report, is another major constraint of business activities in the country. In its bid to tackle inflation which kept accelerating until last month, the CBN hiked the monetary policy rate (MPR) also known as the benchmark interest rate for four consecutive times this year from 18.75 per cent to 26.75 per cent. This has consequently hiked the rates at which banks lend money to businesses. This means that many businesses are unable to take loans from banks to boost their activities, just as those that manage to get loans incur more operational costs, which added to cost of goods and services.
Also, power supply has continued to be a big challenge for businesses in Nigeria. It is also identified as one of the leading cause of stagnation in industrial growth in the country. The causes of the power sector crisis, according to experts, are multifaceted. Apart from generating a paltry average of 4,500 mega watts of electricity, the country has continued to witness cases of national power grid failure, which frequently throws major parts of the country into blackout.
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According to the CBN Business Expectation, survey respondents expressed optimism that there will be an increase in the volume of business activities across sectors in the next six months, expecting employment to also rise, with the agricultural sector having the highest prospect.
“The positive outlook in the volume of business activities of the firms in the next month implied improved prospects for employment in the same period. The sector with the highest prospect for employment is the Agriculture Sector, followed by the Industry and Services sectors,” the report stated.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
