In July, the Nigeria Economic Summit Group (NESG), supported by Stanbic IBTC, identified poor access to financing as the most significant barrier to business growth in its latest Business Confidence Monitor report.
This growing concern stems largely from the Central Bank of Nigeria’s (CBN) ongoing monetary tightening.
In its effort to tame stubborn inflation and stabilise the naira, the CBN continued to raise interest rates aggressively.
Since early 2024, it increased the monetary policy rate from 18.75% to 27.5%.
Consequently, commercial banks adjusted their lending rates to between 33% and 35%, leaving businesses with fewer affordable credit options.
As a result, firms now face serious constraints in expanding their operations, increasing output, or investing in growth.
Economic Pressure Mounts
Although the naira now shows more stability than at any time in the recent past, this policy shift has come at a cost.
While inflation shows signs of easing, many companies struggle under the weight of high borrowing costs.
Furthermore, despite modest improvements in macroeconomic indicators, business performance has lost momentum.
In July, the Business Performance Index fell to 105.4 points — a drop from 113.6 in June — as firms grappled with poor electricity supply, unclear economic direction, soaring commercial rents, and continued insecurity.
Cautious Optimism Ahead
Meanwhile, future outlook remains cautiously optimistic.
The Future Business Expectation Index edged down to 126.1 points in July 2025, signalling tempered expectations among businesses.
Nevertheless, many firms express hope.
They anticipate improvements in business conditions, stronger operating profits, higher production volumes, increased cash flow, better supply orders, and growing customer demand.
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Among the sectors, manufacturing currently leads with the strongest confidence in future performance.
This optimism stems from easing inflation and greater currency stability.
In contrast, the agriculture sector shows the weakest outlook.
Insecurity, erratic weather, and outdated storage infrastructure continue to suppress its growth prospects.
In sum, while Nigerian businesses remain resilient, their ability to access finance will ultimately shape their trajectory — either fuelling recovery or compounding existing struggles have done little to shake the naira’s footing.
Behind the scenes, local players—non-bank corporates and exporters—are stepping up, filling the gap left by thinning foreign interest.
As the naira inched up on Monday and held steady on the streets, it signalled a shift: domestic support, not just foreign capital, is now helping to steady Nigeria’s currency.
On Monday, the naira advanced slightly at the Nigerian Foreign Exchange Market (NFEM).
It gained 0.1%, with dealers quoting the dollar at ₦1,531.95.
This marked a modest rise from Friday’s ₦1,533.74, which kicked off August 2025 on a steady note, according to data from the Central Bank of Nigeria (CBN).
Meanwhile, in the parallel market—Nigeria’s informal FX trading zone—traders kept the naira unchanged at ₦1,560 per dollar.
Last week, rising demand pushed the naira down from around ₦1,530 to ₦1,560, but it managed to stabilise despite the pressure.
Local Players Boost Inflows
However, beneath the surface, FX inflows continued to lose momentum.
According to Coronation Merchant Bank, total inflows dropped to $791.10 million from $979.10 million in the previous week.
Foreign portfolio investors (FPIs) led the international pack, contributing $60.90 million, or 7.7% of total inflows.
In contrast, other international sources contributed a mere 0.76%.
On the domestic front, non-bank corporates significantly ramped up their participation.
They injected $483.60 million into the market, accounting for 61.13% of total inflows.
Simultaneously, exporters and importers nearly doubled their share to $168.60 million, or 21.31%.
Additionally, the CBN supplied $68.40 million, while individuals brought in $3.50 million.
IMF Forecast Lifts Market Sentiment
Furthermore, the naira gained modest strength last week after the International Monetary Fund (IMF) upgraded Nigeria’s economic growth forecast.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the currency edged up by 0.06% week-on-week, closing at ₦1,533.74 per dollar—up from ₦1,534.72 the previous week.
The parallel market held firm at ₦1,540, keeping the street market premium at ₦6.26, or 0.41% above the official rate.
At the same time, Nigeria’s external reserves continued their upward trajectory for the fourth consecutive week.
They rose by $726.80 million, representing a 1.88% increase, to reach $39.36 billion as of Wednesday’s close.
Looking ahead, Coronation Merchant Bank analysts forecast that the FX market will likely trade within the ₦1,500 to ₦1,600 range.
They cite ongoing reserve growth and improved macroeconomic sentiment as key support factors.
However, they caution that declining FX inflows could limit further gains for the naira and make the market more sensitive to changes in investor activity.
In sum, despite facing headwinds from slowing inflows, the naira continues to show resilience—strengthened by local participation, policy stability, and cautious investor optimism.
