High interest rates have been identified as the biggest constraint for Nigerian business firms, surpassing longstanding challenges such as insecurity and insufficient power supply, results of the Central Bank of Nigeria’s (CBN) latest Business Expectation Survey (BES) have revealed.
Conducted in June 2025 with a sample of 1,900 firms across sectors, the BES survey assigned a constraint index score of 75.6 to high interest rates, slightly higher than insecurity (75.2) and insufficient power supply (74.3) as major barriers to business growth and profitability.
The report highlighted that elevated borrowing costs have intensified under the CBN’s hawkish monetary policy aimed at controlling persistent inflation and stabilising the naira. Despite these financial strains, firms remain cautiously optimistic about improving business conditions over the next six months, with varying confidence levels across regions.
Businesses point to these three factors as the major hindrances hurting profitability and limiting expansion in June, the survey stated.
Other constraints included in the report are high taxes, financial problems (68.9), high bank charges (68.7), unfavourable economic climate (67.8), unclear economic laws (67.4), unfavourable political climate (62.5), and poor infrastructure (62.4).
“This suggests that business constraints are more focused on economic and financial risks than political challenges in the review period,” the report noted.
Due to the stubbornly high inflationary pressures, the CBN has continued to maintain a hawkish stance in a deliberate move to curb rising prices and lure in dollar inflows, which will ultimately shore up the value of the naira.
Monetary authorities hiked key benchmark interest rates by a cumulative 875 basis points to 27.5 percent and have since held it steady for the fourth consecutive time to better assess the country’s inflation outlook.
Still, Nigerian firms remain cautiously optimistic. The CBN’s June Business Confidence Index stood at 20.7 and is projected to rise to 41.3 over the next six months, driven by expectations of increased activity and better operating conditions.
However, confidence varies by region: the South East posted the lowest score, 4.4, weighed down by high interest rates, while the North East showed the highest optimism, 37.1. Businesses also anticipate a stronger naira, even as they prepare for further borrowing cost increases.
The apex bank governor, Yemi Cardoso, emphasised the need for a high interest rate in a volatile macroeconomic environment. “High interest rates are painful. We all know that. We all recognise that, especially for the real sector. But interest rates are not just about affordability, they are also about credibility,” he said, at the National Domestic Investment Summit held in Abuja on Monday.
He cited the current monetary policy stance as evidence that Nigeria is ready and determined to restore macroeconomic balance, regain investors’ confidence, and defend the naira’s value.
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