Nigeria’s business confidence climbed to its highest level in over a year in February 2026, reflecting renewed optimism among manufacturers, traders and service providers amid easing monetary conditions and expectations of stronger bank balance sheets.
Fresh data from the Nigerian Economic Summit Group (NESG) show that the Business Confidence Monitor (BCM) index rose sharply during the month, signalling a broad-based expansion in economic activity.
The rebound comes as businesses react positively to the recent monetary policy adjustment by the Central Bank of Nigeria (CBN) and the ongoing recapitalisation of deposit money banks.
Business confidence strengthens across key sectors
The latest BCM reading indicates that business confidence improved significantly in February, driven by stronger production levels, rising demand conditions and modest relief in cost pressures.
Manufacturing firms reported higher output and improved order books, while non-manufacturing businesses recorded the fastest pace of expansion among the five sectors tracked.
Trade activity rebounded strongly after a sluggish start to the year, suggesting that consumer demand is gradually firming up despite persistent inflationary pressures.
Agriculture also returned to expansion territory, pointing to improved activity across the value chain, from primary production to processing and distribution. In the services sector, firms reported steady gains, though growth remained more moderate compared to manufacturing and trade.
Analysts say the synchronised improvement across sectors underscores a gradual stabilisation of macroeconomic conditions, which had weighed on business confidence for much of the previous year.
Rate cut fuels renewed business confidence
A central driver of the uptick in business confidence is the CBN’s decision to lower the Monetary Policy Rate (MPR) by 50 basis points to 26.5 percent at its February 2026 Monetary Policy Committee meeting.
Although borrowing costs remain elevated in real terms, the symbolic shift toward monetary easing has strengthened expectations that the peak of the tightening cycle may have passed.
Businesses anticipate that a sustained moderation in interest rates could lower debt servicing burdens, unlock working capital and stimulate investment spending.
Financial conditions — a key sub-index within the BCM — improved during the month, reflecting better access to credit and slightly stronger cash flow positions. Export activity and new supply orders also edged into expansionary territory, reinforcing the narrative of improving demand.
Economists note that forward-looking indicators within the survey suggest that business confidence may remain elevated in the near term, provided inflation continues to decelerate and exchange rate volatility is contained.
Bank recapitalisation supports medium-term outlook
Another major pillar supporting business confidence is the CBN’s bank recapitalisation programme, which requires deposit money banks to strengthen their capital base ahead of a March 2026 deadline.
Market participants expect the exercise to enhance banks’ resilience, improve risk absorption capacity and expand their ability to lend to critical sectors such as manufacturing, agriculture and infrastructure.
Stronger capital buffers are also seen as essential for supporting Nigeria’s ambition of achieving higher non-oil growth. Businesses surveyed by NESG indicated that a well-capitalised banking system would improve credit intermediation and reduce systemic vulnerabilities.
However, some analysts caution that the full benefits of recapitalisation will depend on asset quality, regulatory oversight and broader macroeconomic stability.
Cost pressures ease but structural risks persist
While business confidence is on the rise, firms continue to grapple with structural bottlenecks.
Survey respondents cited limited access to affordable financing, irregular electricity supply, high energy costs, rental inflation and insecurity as ongoing constraints to expansion.
Although the cost-of-doing-business index moderated slightly in February, input prices remain elevated relative to historical norms.
Businesses warn that any resurgence in inflation — particularly if driven by fiscal slippages or exchange rate pressures — could quickly erode recent gains in business confidence.
Election-related spending expected later in the year may stimulate short-term activity, particularly in construction, trade and services.
However, excessive fiscal injections could complicate the disinflation process and put renewed pressure on interest rates.
Forward outlook for business confidence
The Future Business Expectations Index — which captures firms’ outlook over the next one to three months — rose markedly in February, indicating strong optimism across most sectors.
Manufacturing and trade recorded the highest optimism levels, while services posted comparatively softer expectations but remained firmly in expansion territory.
This forward-looking improvement suggests that business confidence is not merely reactive to short-term policy shifts but anchored in expectations of a gradually improving macroeconomic environment.
For policymakers, sustaining this momentum will require a delicate balance between monetary easing and inflation control, alongside structural reforms that address power supply, logistics inefficiencies and security challenges.
If macroeconomic stability is preserved and financial sector reforms deliver the anticipated credit expansion, Nigeria’s business confidence could maintain its upward trajectory in the coming quarters — providing a much-needed boost to growth and private sector investment.
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