By Chinwendu Obienyi
Businesses across Nigeria are facing a clouded economic outlook, caught between cautious optimism over currency stability and growing concern about the rising cost of borrowing, according to the latest data from the May 2025 Business Expectations Survey (BES) published by the Central Bank of Nigeria (CBN) recently.
The monthly survey, conducted from May 5 to 9, with responses from 1,900 firms across the country, reveals that a significant number of Nigerian businesses expect the naira to appreciate modestly against the US dollar in the near term, a sentiment reflected by a positive net confidence index.
However, alongside this glimmer of hope is a clear apprehension: borrowing rates are expected to rise further, threatening business expansion, investment, and job creation.
This has led to business owners thinking about strategies to navigate the harsh operating environment in the coming months despite demonstrating a strong sense of optimism regarding the state of the economy, Daily Sun learnt.
The report revealed that firms across every sector surveyed expressed positive sentiments concerning employment and expansion prospects for all the review periods. While this overall optimistic outlook continued to prevail, companies noted that there were several operational challenges that might temper growth prospects.
Chief among these concerns were insecurity, high interest rates, heavy taxation, all of which remained key obstacles to sustainable business operations and investment planning, highlighting concerns around factors that directly impact operational stability and profitability.
“Respondents expect the Naira to US Dollar exchange rate to appreciate across the review periods, as indicated by a positive index. They also anticipate an increase in the borrowing rate during the same period”, the report said.
Analysts, however, caution that sentiment may quickly turn negative if inflation currently hovering 23.71 per cent year-on-year rises or if exchange rate gains prove short-lived.
Giving his opinion to the report, senior economist at the Lagos Business School, Dr Tayo Oyekan, said, “The outlook is mixed, and that reflects the real tension businesses are experiencing. On one hand, the recent foreign exchange reforms and improved oil receipts have provided some support for the Naira. On the other hand, tighter monetary policy driven by the CBN’s inflation-fighting stance means that credit is getting more expensive.”
This dual dynamic, currency optimism amid tightening credit, creates a complex environment for businesses. Manufacturers, for example, might benefit from a stronger Naira reducing import costs, but face higher financing costs for machinery, inputs, and working capital.
Temitayo Adebayo, an agro-business entrepreneur, said, “For us, the stronger Naira is welcome, but if we cannot borrow at affordable rates, then it is a double-edged sword because the banks are already quoting double-digit interest rates above 30 per cent for loans. It is not sustainable for long-term investment.”
For his part, Vice Chairman, Board at Highcap Securities Limited, David Adonri, said, “Monetary tightening is necessary to control inflation, but it must be balanced with policies that support production and credit access. Otherwise, we risk strangling the very businesses we need to drive recovery and employment.”
The CBN Governor, Olayemi Cardoso had during the Monetary Policy Committee (MPC) meeting in Abuja recently, stated that the economy is not just stabilizing as it is being restructured for long-term credibility and growth.
However, despite a growing confidence in the macro-economy, especially among SMEs and in sectors like agriculture and construction, the threat of rising interest rates and persistent structural challenges could temper expansion and investment, particularly for larger firms.