CBN Survey: Multiple Taxation, Insecurity and High Interest Rates Top Business Concerns

Multiple taxation, insecurity and high interest rates were the biggest obstacles to business activity in September, according to the Central Bank of Nigeria's latest Business Expectations Survey. Despite the pressure, overall business sentiment stayed positive, with the Business Confidence Index at 13.4 points.

Firms also expect conditions to improve in the coming months, driven by stronger demand, economic diversification and better access to finance.

Tax burden leads the pack

High or multiple taxation ranked as the most significant concern among surveyed businesses, recording 67.1 index points. It came ahead of insecurity, which scored 66.2 points, and high interest rates at 64.3 points.

The three top constraints point to the combined weight of government charges, security risks and expensive credit on business operations.

Other major constraints cited by respondents include an unfavourable political climate at 61.8 points and high bank charges at 61.5 points. Competition recorded 60.2 points, while unclear economic laws and an unfavourable economic climate each scored 58.7 points. Financial constraints followed at 57.5 points, and poor infrastructure came last among the 10 major constraints with 55.0 points.

The ranking suggests that while infrastructure remains a longstanding problem, firms currently see taxation, insecurity and borrowing costs as more immediate threats.

Why firms remain optimistic

The CBN said businesses maintained a positive outlook in September. Respondents credited increased demand, economic diversification and access to finance for their optimism.

Increased demand accounted for 29.3 per cent of the factors supporting the positive outlook. Economic diversification followed at 18.9 per cent, while access to finance contributed 13.5 per cent. The industry sector recorded the strongest improvement in sentiment during the month.

On the foreign exchange market, businesses stayed optimistic about the naira, expecting the currency to post modest gains against the US dollar across the various review periods.

Regional outlook

Sentiment was broadly positive across the regions, with businesses expressing optimism about the macroeconomic outlook for the coming month. The South-East was the only region that did not share the positive near-term outlook. The North-East emerged as the most optimistic region across the forecast periods.

The persistence of high interest rates could continue to weigh on investment and expansion plans, especially for businesses that depend heavily on bank financing for working capital and new projects. For the naira, the surveyed firms' expectation of modest gains against the dollar adds to a cautiously positive read on the currency, even as tax and security pressures keep operating costs high for Nigerian businesses.