Additional constraints identified by the survey include multiple taxation, unreliable power supply, and an unfavourable economic climate.
Businesses across Nigeria are grappling with a difficult operating environment as high interest rates, insecurity, and multiple taxes rank among the most pressing constraints, according to the latest Central Bank of Nigeria (CBN) survey.
The October Business Expectations Survey, which provides insights into the prevailing economic challenges faced by businesses, highlights persistent hurdles that could potentially stifle growth and investment in the country.
It is aimed at gauging economic sentiment and challenges, revealing that high interest rates top the list of obstacles, a concern shared across industries.
According to the survey, businesses cite the elevated cost of borrowing as a significant deterrent to expansion and day-to-day operations.
This issue has been exacerbated by Nigeria's broader monetary tightening measures aimed at controlling inflation, which reached 32.7 per cent in September - a level not seen in recent years.
Insecurity was ranked as the second-most critical issue, with firms expressing concerns over the impact of violence and criminal activity on their operations.
Security challenges have not only increased business costs through heightened expenditure on private security but have also discouraged potential investments in regions heavily affected by such risks.
"The outlook on the macro economy for November 2024, January and April 2025 indicates that the Northeast region continues to drive the optimism on the economy for the review periods," it said.
Additional constraints identified by the survey include multiple taxation, unreliable power supply, and an unfavourable economic climate.
"Respondents were optimistic about the overall business outlook in October 2024. However, insecurity, high interest rates, unfavourable economic climate, financial problems, and high or multiple taxes, inadequate power supply were identified as key factors constraining business activities," CBN said.
Multiple layers of taxes imposed by various governmental agencies have weighed heavily on businesses, particularly small and medium-sized enterprises, which struggle to absorb these costs.
Insufficient power supply continues to push companies towards costly alternatives, such as generators, which further increase operating expenses.
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Despite these hurdles, the survey suggests a cautious optimism among Nigerian businesses about future growth, with several sectors, including agriculture and non-market services, forecasting modest improvements in business confidence and expansion plans in the coming months.
However, manufacturing remained a sector of concern, with respondents citing its low outlook due to the cumulative effect of these constraints.
The survey also sheds light on exchange rate expectations, with respondents predicting a near-term depreciation of the naira but an appreciation in the medium term.
The currency has faced pressure following exchange rate unification policies, which led to a marked decline in its value earlier this year.
A depreciating naira continues to challenge import-dependent industries, as costs rise, affecting both input prices and consumer demand.
Capacity utilisation remains relatively robust, especially within the mining, quarrying, electricity, gas, and water supply sectors, where businesses reported the highest rates of utilisation.
These industries appear to have weathered the challenging conditions better than others, reflecting their critical role in the economy.
The survey, according to the CBN, is a monthly survey of leading firms drawn from Business Establishment updated frames of CBN and the National Bureau of Statistics. Its result provides an advanced indication of the change in the overall business activity in the economy.
"The October 2024 Business Expectations Survey (BES) was conducted from October 7 to 19, 2024, with a sample size of 1,750 business enterprises across Nigeria. The survey achieved a response rate of 98.0%, covering three key sectors: Industry, Services, and Agriculture," it said.
