The latest report by Nigerian data company, Mustard Insights, has revealed the staggering impact of economic headwinds on businesses operating in Nigeria.
The report, titled Nigeria’s Business Survival Report 2024: Strategies for Sustainable Business Growth Amid Economic Turbulence, highlights that 43.7% of business owners were forced to reduce their workforce in 2024, underscoring the severe strain that economic disruptions have placed on companies across various sectors.
This revelation paints a grim picture of Nigeria’s job market, reinforcing widespread belief that the country’s actual unemployment rate is far higher than the figures reported by the National Bureau of Statistics (NBS).
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“Similar to survey insights where raw material cost was identified as the highest cost element (input costs), analysis of NGX companies reveals a significant increase in costs in the year 2024 compared to 2023 compared to the rise in direct costs from 2022 to 2023,” an excerpt of the report reads.
The Mustard Insights report also highlights that among Nigeria’s top-listed companies on the NGX-30, there was a sharp rise in direct costs in 2024 compared to previous years. In the period between 2022 and 2023, around 70% of listed firms saw an increase of less than 50% in their direct costs.
However, by 2024, a dramatic shift had occurred, with 80% of companies reporting a 51% to 100% rise in costs, and the remaining 20% experiencing increases of more than 100%. This exponential surge in costs has left businesses in a precarious position, struggling to maintain profitability amid rising operational expenditures.
The findings of the report shed light on the dire state of Nigeria’s economic climate, where businesses are left with few viable options for survival. The widespread job losses, the scaling back of operations by major corporations, and the retreat of multinationals all point to a worsening economic crisis. The private sector, which should be a key driver of employment and economic growth, is under immense pressure, leading to a slowdown in investment and business expansion.
The extent of job losses recorded in 2024 signals a significant rise in unemployment, further compounding the financial distress faced by many Nigerians. The situation has been worsened by a wave of business closures, with even well-established multinational corporations either shutting down their Nigerian operations or exiting the country entirely.
The mass exodus of major firms is a testament to the difficult operating environment characterized by rising inflation, currency devaluation, prohibitive business costs, and an overall decline in consumer purchasing power.
The economic downturn, intensified by the removal of fuel subsidies and the devaluation of the Naira, has severely impacted the cost structure of businesses. Many companies have seen their direct costs soar, driven by surging expenses for raw materials, transportation, energy, and wages. According to Mustard Insights, corporate earnings have been significantly eroded, forcing businesses to make difficult decisions such as downsizing their workforce, scaling back expansion plans, or, in extreme cases, shutting down operations altogether.
The financial burden on companies has also been reflected in the rising cost of goods and services, with 65% of businesses admitting to increasing their prices in an attempt to offset the rising expenses. However, this has only worsened the situation for consumers, who are already grappling with an all-time high cost of living. Inflation, which surged to 34.80% by December 2024 according to the NBS, has further squeezed disposable incomes, leaving many Nigerians struggling to afford basic necessities.
As businesses continue to battle rising costs, multinationals that once viewed Nigeria as a lucrative market have been retreating. Over the past year, companies such as Procter & Gamble (P&G) and GlaxoSmithKline (GSK) announced their exit from the Nigerian market, citing harsh economic conditions that have made it difficult to sustain operations.
In the retail sector, Shoprite, which had been a dominant player for years, completed its phased withdrawal from the country, pointing to dwindling profitability and operational challenges. Similarly, in the financial services sector, some foreign banks and fintech firms have scaled down their operations due to the unfavorable regulatory and macroeconomic climate.
Industry analysts warn that unless the Nigerian government implements urgent and effective policy measures to stabilize the macroeconomic environment, more businesses could shut down in 2025, leading to even higher unemployment and a deeper economic crisis. While some businesses are attempting to navigate the storm through cost-cutting strategies, automation, and diversification, the long-term sustainability of these measures remains uncertain due to the current trajectory of the economy.