Nigeria’s business activity strengthened in July, but rising operating costs are making companies more cautious about investing, raising concerns over the sustainability of the country’s economic recovery.
The latest Business Confidence Monitor (BCM) by the Nigerian Economic Summit Group (NESG) showed that the Current Business Performance Index rose to 108.6 points in July from 104.6 points in June.
The July figure was also higher than the 105.4 points recorded in the same month of 2025, indicating stronger business activity across major sectors of the economy.
The improvement was led by the non-manufacturing sector, while services, agriculture, manufacturing and other major areas of the economy recorded expansion during the month.
However, the report showed that stronger business performance has not translated into greater willingness to invest.
Businesses reported improved production, profitability, demand and supply orders in July, but many remained reluctant to commit fresh capital because of rising energy costs, expensive credit, poor infrastructure and insecurity.
“Although production, operating profits, financial results, employment, demand conditions and supply orders all strengthened during the month, investment remained in contraction,” the NESG said.
The group said the situation showed that businesses were becoming more cautious about expansion as cost pressures increased.
Access to credit also weakened slightly during the month, adding to concerns over the ability of companies to finance expansion.
NESG identified limited access to finance, energy shortages, rising commercial property rents, insecurity and poor infrastructure as the major challenges facing businesses.
The report said these problems continue to increase operating costs, reduce profitability and delay expansion plans across different industries.
Manufacturing recorded strong growth in July, with its Business Performance Index rising to 110.5 points from 106.4 points in June.
The sector also recorded a major improvement compared with the 98.0 points recorded in July 2025.
According to NESG, the improvement was supported by stronger activity in cement, textiles, apparel and footwear, chemicals and pharmaceutical products.
Despite the growth, manufacturers continued to face problems including tight credit conditions, unreliable electricity supply, shortages of raw materials, poor infrastructure and rising rental costs.
Some manufacturing segments, including plastic and rubber products, non-metallic products, pulp and paper, and motor vehicle assembly, remained in contraction.
The non-manufacturing sector recorded the strongest performance during the month, with its Business Performance Index rising to 116.6 points.
The growth was supported by stronger activity in crude petroleum, natural gas and oilfield services.
However, businesses in the sector also identified power outages, higher rents and poor infrastructure as major factors increasing their operating costs.
Agriculture also recorded stronger growth, with its Business Performance Index rising to 110.8 points from 103.9 points in June.
The improvement was supported by favourable rainfall and better crop production.
Agricultural businesses, however, continued to identify insecurity, poor infrastructure, energy shortages and limited access to finance as major barriers to further expansion.
The services sector also returned to growth after recording a contraction in June.
Its Business Performance Index increased to 108.3 points, supported mainly by stronger activity in financial institutions, real estate and professional services.
NESG linked part of the improvement to stronger earnings in the financial services industry.
Telecommunications and information services, however, returned to contraction, while businesses in the sector continued to face power shortages, regulatory uncertainty, high rents and limited access to credit.
Trade activity also remained positive, although growth was relatively weak.
The Trade Business Performance Index increased slightly to 102.8 points from 102.0 points in June, reflecting marginal growth in wholesale and retail trade.
NESG said limited access to finance, energy shortages, logistics problems and regulatory constraints continued to restrict stronger growth in the sector.
Despite the improvement in current business activity, companies are becoming slightly less optimistic about the months ahead.
The Future Business Expectations Index fell marginally to 128.3 points in July from 128.4 points in June.
Trade and manufacturing companies recorded the strongest confidence about future business conditions, while agriculture and services businesses were less optimistic.
NESG attributed the cautious outlook partly to concerns over renewed cost pressures, particularly the possible impact of Dangote Refinery’s move towards dollar-denominated petrol pricing.
Businesses fear that the development could keep energy costs high in the coming months.
The latest survey highlights a major challenge for Nigeria’s economic recovery.
While output is increasing and most sectors are expanding, businesses are still struggling with the high cost of running their operations.
The NESG warned that the sustainability of the recovery would depend largely on the ability of policymakers to reduce the cost of doing business.
“Without cheaper financing, improved electricity supply, better infrastructure and lower energy costs, businesses may continue to postpone the investments needed to create jobs, expand production and sustain economic growth,” the report said.