‘Economic Reforms Alone Won’t Spark Private Sector Growth’

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LAGOS – Experts have said that without meaningful improvements in se­curity, infrastructure and policy coordination, economic reforms alone may not be sufficient to unlock broad-based private sec­tor growth.

They stressed that insecurity poses a particularly damaging threat because it affects both domestic and foreign investor perceptions of risk.

Foreign investors, they not­ed, often place security consid­erations above macroeconomic indicators when making in­vestment decisions, especially in emerging markets.

They outlined these after the Central Bank of Nigeria’s (CBN) latest Business Expecta­tions Survey showed Nigeria’s fragile business environment has come under renewed strain as insecurity emerged as the single biggest operational chal­lenge confronting firms across the country, overshadowing tax­ation, high borrowing costs and exchange rate volatility.

The April 2026 survey, which covered about 1,900 businesses nationwide, revealed that in­security scored 74.1 points on the index of operational con­straints, making it the high­est-rated challenge affecting business operations and invest­ment decisions in the country.

The development signals a major shift in corporate con­cerns, especially in an economy where inflation, forex instability and policy uncertainty have his­torically dominated boardroom discussions.

Analysts say the rise of in­security above macroeconomic variables reflects growing anx­iety among investors over the sustainability of operations, movement of goods, protection of assets and the overall cost of doing business.

The report also highlighted high taxation and elevated in­terest rates as major concerns for businesses, underlining the severe cost pressures facing firms amid lingering economic reforms, energy price adjust­ments and weak consumer purchasing power.

Despite these headwinds, the survey showed that businesses retained a modest level of opti­mism about the economy, with the overall confidence index standing at 3.9 points in April 2026.

However, the figure reflected cautious optimism rather than strong business confidence, as many firms continue to grapple with rising operational expens­es and declining profit margins.

Economic analysts said the survey paints a picture of an economy struggling to balance reform-driven adjustments with worsening structural deficien­cies.

According to the report, the emergence of insecurity as the leading operational challenge is not merely a reflection of rising crime statistics but an indication of weakening con­fidence in Nigeria’s operating environment.

Businesses across sectors have increasingly raised con­cerns over kidnapping, attacks on logistics corridors, destruc­tion of assets, theft, communal conflicts and the rising cost of private security arrangements.

For many companies, espe­cially manufacturers, agro-pro­cessors and logistics operators, insecurity has become a direct production and supply chain risk.

Industry operators noted that insecurity now affects virtually every segment of business activ­ity, from sourcing raw materials and transporting finished goods to staff mobility and market ac­cess.

In many parts of the country, firms are reportedly spending significantly more on private security, insurance coverage and alternative logistics ar­rangements, adding to already elevated operating costs.

The survey findings come at a time when businesses are also contending with tighter financial conditions following sustained monetary tightening by the Central Bank of Nigeria aimed at controlling inflation and stabilising the naira.

Borrowing costs remain elevated across the banking system, making access to credit increasingly difficult for small and medium-scale enterprises as well as large manufacturers seeking ex­pansion financing.

Analysts said the combi­nation of insecurity and high interest rates creates a particu­larly difficult environment for productive investment.

“When businesses are un­certain about security and si­multaneously unable to access affordable financing, long-term investment decisions become difficult,” an economist said.

The survey further showed that taxation remains a major source of concern among busi­nesses, reflecting complaints over multiple taxes, levies and regulatory charges imposed by different tiers of government.

Many firms have repeatedly argued that excessive taxation continues to erode profitability and discourage formal sector participation, particularly among smaller enterprises al­ready battling weak consumer demand and rising input costs.

Businesses are equally fac­ing mounting pressure from energy tariff increases, subsidy reforms and exchange rate vola­tility, all of which have sharply increased production costs over the past two years.

Manufacturers and service providers have seen operating expenses surge due to higher electricity tariffs, increased diesel prices and imported raw material costs linked to naira depreciation.

Although recent foreign ex­change reforms have improved liquidity in the official market, exchange rate fluctuations con­tinue to create uncertainty for businesses dependent on im­ported inputs and machinery.

The survey showed that while some sectors recorded stronger confidence levels, opti­mism remained uneven across the economy.