CBN Report Reveals Impediments to Business Operations

According to a new report by the Central Bank of Nigeria (CBN), businesses across Nigeria have ranked high interest rates as the most severe constraint affecting their operations in June 2025, overtaking long-standing challenges such as insecurity and poor electricity supply.

The apex bank disclosed this in its June 2025 Business Expectations Survey, which polled 1,900 firms across the agriculture, services, and industrial sectors. According to the report, high interest rates scored 75.6 on the constraint index, followed by insecurity at 75.2 and insufficient power supply at 74.3.

“Respondents identified High interest rate (75.6), Insecurity (75.2), and Insufficient power supply (74.3) as the top three business constraints in June 2025, highlighting concerns around factors that directly impact operational stability and profitability,” the CBN stated in the report.

The findings reflect increasing discomfort among business operators, many of whom are struggling with expensive credit amid tight monetary conditions.

Although insecurity and electricity shortages have remained major structural barriers to economic productivity, the sharp rise in borrowing costs appears to have compounded existing burdens, especially for small and medium-scale enterprises.

The pressure comes as the CBN maintains a hawkish stance in its monetary policy drive to contain inflation and stabilise the naira. However, the downside of this approach, according to experts, is that it has left businesses grappling with costlier loans and dwindling liquidity.

Other challenges highlighted by the survey include high bank charges (73.2), multiple taxes (68.9), an unfavourable economic climate (68.7), and unclear economic laws (67.4).

Meanwhile, infrastructure gaps and political instability scored lower on the index, with 62.4 and 62.5, respectively, suggesting that financial and regulatory constraints currently weigh heavily on business operations than political issues.

“This suggests that business constraints are more focused on economic and financial risks than political challenges in the review period,” the report added. Despite the challenges, the survey showed that many firms remain optimistic about business prospects in the months ahead.

The Business Confidence Index for June was 20.7 but is projected to rise steadily to 41.3 over the next six months, driven by expectations of improved activity and more favourable operating conditions.

The outlook, however, varies across regions. The South-East recorded the lowest business confidence score at 4.4, which the report linked to high interest rate sensitivity in the region. On the other hand, the North-East recorded the highest level of optimism at 37.1.

The report read, “This optimism was highest in the North-East region at 37.1 index points and lowest in the South-East region at 4.4 index points. The low level of optimism in the South-East could be attributed mainly to the sentiments surrounding high interest rates.”

Firms surveyed also expressed expectations that the naira will appreciate over the coming months, even though they anticipate that borrowing costs may rise further.

Meanwhile, the Monetary Policy Committee of the CBN retained the Monetary Policy Rate at 27.5 per cent for the third consecutive time in 2025, opting to keep all key policy parameters unchanged. The Governor of the Central Bank, Olayemi Cardoso, disclosed this at a press briefing following the conclusion of the committee’s 301st meeting held between July 21 and 22.

Cardoso said, “The Committee decided to maintain the current policy stance and hold all policy parameters constant.” He explained that the decision was taken to sustain the ongoing momentum of disinflation and to contain emerging inflationary pressures, noting that the policy stance would continue until risks to inflation had declined sufficiently.

Aside from maintaining the MPR at 27.5 per cent, the committee also kept the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio at 50 per cent for Deposit Money Banks and 16 per cent for Merchant Banks, and the Liquidity Ratio at 30 per cent.

This marks a third pause in interest rate changes following six consecutive hikes recorded in 2024. The committee’s decision was informed by recent economic data, particularly the headline inflation rate, which declined for the third straight month to 22.22 per cent in June from 22.97 per cent in May.

The decline was primarily attributed to falling energy prices and a relatively stable foreign exchange market. However, food and core inflation recorded marginal increases during the period, with food inflation rising to 21.97 per cent from 21.14 per cent, and core inflation moving up to 22.76 per cent from 22.28 per cent.

On a month-on-month basis, headline inflation rose slightly to 1.68 per cent from 1.53 per cent, driven largely by increases in the prices of services and imported food items. Cardoso stated that while year-on-year inflation figures were encouraging, the uptick in monthly inflation indicated that underlying price pressures persisted, necessitating a cautious monetary policy stance.

He also pointed to the impact of global geopolitical tensions and ongoing tariff wars, which could disrupt global supply chains and drive up the cost of imports.

However, the Director-General of the Lagos Chamber of Commerce and Industry, Dr Chinyere Almona, earlier warned that retaining the MPR at 27.5 per cent translates to a significant burden on businesses.

“We must restate that the interest rate at 27.5 per cent remains a depressing burden on businesses. We therefore desire to see a reduction in the Monetary Policy Rate,” Almona said.

Also, former Chief Economist at Zenith Bank, Marcel Okeke, questioned the MPC for maintaining the rate, which he claimed was damaging to the real economy.

“The tight monetary policy of the Central Bank of Nigeria is injurious; it is dangerous to many operators in the economy. To any business that needs funding, the high interest rate is injurious. As a matter of fact, many small businesses have been crowded out of the financial system. They cannot access funds,” he said.