Businesses across Nigeria say high interest rates have become the most severe threat to their operations—more disruptive than insecurity or erratic electricity—according to the Central Bank of Nigeria’s latest Business Expectations Survey (BES) for June 2025.
The survey, conducted from June 16 to 20 by the apex bank’s Statistics Department, covered 1,900 firms across sectors such as Industry, Agriculture, Construction, Wholesale/Retail, and Services. It found that businesses gave high interest rates a constraint index score of 75.6, edging out insecurity (75.2) and insufficient power supply (74.3)—two problems that have historically topped Nigeria’s list of economic bottlenecks.
“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,” the CBN stated.
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The result underscores the growing strain on corporate finances, especially among small and medium-sized enterprises (SMEs), as Nigeria maintains tight monetary policy to curb inflation and stabilize the naira.
How the Interest Rate Became a Bigger Threat than Insecurity
The elevation of interest rates as the top constraint reflects a shift in the risk profile businesses now face. Since early 2024, the CBN has aggressively raised its benchmark Monetary Policy Rate (MPR) to rein in inflation, which peaked near 34% in April before moderating slightly. The MPR currently stands at 27.5%, with commercial lending rates in some cases exceeding 30%, making it exceedingly difficult for firms to access affordable credit.
While insecurity—particularly in the North-West and Middle Belt—remains a serious operational hazard, and poor electricity supply continues to sap productivity, the financial impact of borrowing costs is now perceived as more immediate and pervasive.
Other Headwinds: Taxes, Bank Charges, and the Economic Climate
The survey also lists other top operational burdens. High bank charges scored 73.2, followed by high taxes (68.9) and an unfavorable economic climate (68.7). Unclear economic laws (67.4), poor infrastructure (62.4), and an unfavorable political climate (62.5) were also mentioned, though they ranked slightly lower.
According to the CBN, “This suggests that business constraints are more focused on economic and financial risks than political challenges in the review period.”
Optimism Holding, but Not Everywhere
However, the outlook remains surprisingly upbeat. The Business Confidence Index (BCI) for June stood at 20.7, with projections showing it could rise to 41.3 in the next six months as businesses anticipate improved economic activity.
The optimism varies significantly by region. In the South-East, confidence is lowest at 4.4, with the CBN attributing this to the acute effect of high interest rates and sluggish local activity. In contrast, the North-East registered the highest optimism at 37.1, as some firms see more stable conditions and anticipate relief measures.
The BES also found that businesses expect the naira to appreciate in the coming months, driven by a mix of tighter monetary controls and improved foreign exchange inflows. However, expectations of further increases in borrowing costs persist, raising concerns about access to capital.
Policy Implications: MPC Holds, or Cuts?
The CBN’s Monetary Policy Committee (MPC) is currently meeting, and analysts are split on the next move. While many expect the Bank to hold the MPR at 27.5% for a third consecutive time, others are betting on a modest rate cut to 27.25%, possibly accompanied by tweaks to the asymmetric corridor as a signal of cautious policy calibration.
In summary, the rise of interest rates as Nigeria’s top business constraint signals a pivotal shift in how firms experience economic hardship. While physical threats like insecurity and poor infrastructure remain persistent, the financial toll of borrowing is now taking center stage—putting even more pressure on the CBN to balance monetary tightening with policies that foster growth and productivity.
The June BES paints a picture of cautious optimism wrapped in frustration, as firms navigate a terrain where costs are climbing and opportunities are tightening. Whether this changes after the MPC meeting could define the tone of Nigeria’s business environment for the rest of the year.