The Central Bank of Nigeria’s latest Business Expectation Survey shows that business confidence slipped in June 2026, driven by escalating operational costs and persistent inflationary pressures. The survey’s Business Confidence Index fell to 48.2 points in June from 51.3 in May, indicating a contraction in business sentiment for the first time in three months.
Rising Costs Dampen Optimism
According to the CBN report, 67% of respondent firms cited high operational costs as the primary factor undermining confidence. Fuel price increases and electricity tariff hikes were the main contributors, with 42% of businesses reporting that energy expenses had risen by more than 15% month-on-month. The survey, which polled 1,600 firms across 36 states and the Federal Capital Territory, also highlighted that 55% of businesses expect costs to remain elevated in the third quarter.
“The persistent rise in input costs, particularly for energy and raw materials, is squeezing profit margins and forcing many firms to scale back expansion plans,” the CBN report noted. The survey was conducted between June 1 and June 20, 2026.
Inflation and Demand Concerns
Inflation expectations remained high, with 73% of respondents anticipating that prices will increase further in the next three months. Consumer demand weakness was flagged by 38% of firms, particularly in the retail and manufacturing sectors. The survey’s sub-index for business activity dropped to 44.5 from 49.1, signaling a contraction in output.
“The combination of high costs and weak demand is creating a challenging environment for businesses, especially small and medium-sized enterprises,” said Dr. Amina Yusuf, an economist at the University of Lagos, commenting on the findings. She noted that the survey reflects the broader macroeconomic headwinds facing Nigeria.
Sectoral and Regional Variations
The services sector recorded the sharpest decline in confidence, with its index falling to 45.6, while the industrial sector slipped to 47.3. Agriculture held relatively steady at 49.8, supported by improved rainfall and harvest expectations. Regionally, businesses in the South-West reported the lowest confidence at 46.1, while the North-East showed a slight improvement to 50.2, driven by increased government spending on infrastructure.
The CBN survey also revealed that 28% of firms plan to reduce their workforce in the coming months, up from 22% in May. This raises concerns about the labor market, which has already been under pressure from rising unemployment.
Policy Implications
The findings come as the Monetary Policy Committee prepares for its next meeting in July. Analysts expect the CBN to maintain its hawkish stance, with the benchmark interest rate likely to remain at 27.5% to curb inflation. However, some economists argue that further rate hikes could worsen the business environment by increasing borrowing costs.
“The CBN is walking a tightrope between controlling inflation and supporting growth,” said Mr. Chidi Okonkwo, a financial analyst based in Lagos. “The survey shows that businesses are struggling, and any further tightening could exacerbate the situation.”
The report underscores the need for coordinated fiscal and monetary policies to address the root causes of rising costs, including energy infrastructure deficits and supply chain disruptions.
