By Iroyin Yoruba Television
Nigeria’s economy recorded another month of expansion in September, with business activity strengthening across major sectors, but the latest Central Bank of Nigeria survey data have highlighted a widening gap between improving economic indicators and the financial experience of many households.
The development presents a mixed picture for the Nigerian economy.
On one side, businesses reported increased output, new orders, employment and inventories during September, while supplier delivery times also improved.
On the other, household sentiment deteriorated sharply, inflation concerns remained elevated and businesses continued to identify taxation, insecurity and high interest rates among their most significant operating challenges.
The contrast is important because economic growth is ultimately expected to translate into improved incomes, employment opportunities, purchasing power and living conditions.
For now, the latest indicators suggest that Nigeria may be experiencing a period of improving economic activity without a corresponding improvement in household confidence.
BUSINESS ACTIVITY REMAINS IN EXPANSION TERRITORY
The composite Purchasing Managers’ Index rose to 53 points in September, marking the fourth consecutive month of expansion.
A PMI reading above 50 generally indicates expansion in private-sector activity, while a reading below 50 indicates contraction.
The September reading therefore suggests that businesses continued to experience growth in overall activity.
The improvement was not confined to one part of the economy.
Industry, services and agriculture all recorded growth during the month, indicating that the expansion was relatively broad-based.
Businesses reported increases in output and new orders, suggesting that demand for goods and services remained sufficiently strong to support higher levels of production.
Employment also expanded, while businesses increased their raw-material inventories.
Supplier delivery times improved as well, an indication that some of the logistical constraints affecting businesses may have eased compared with earlier periods.
Taken together, the indicators provide evidence that economic activity is continuing to recover from previous periods of weakness.
HOUSEHOLDS ARE NOT EXPERIENCING THE RECOVERY IN THE SAME WAY
Despite the stronger business indicators, household confidence moved in the opposite direction.
The CBN survey showed a deterioration in household sentiment during September.
This divergence between business activity and household confidence is significant.
Economic growth can occur even when households continue to feel financially constrained.
Businesses may increase production because of stronger orders, government spending, investment activity or improving supply conditions, while households may still face high food, housing, transportation, healthcare and other living expenses.
When household income does not rise as quickly as expenses, consumers may remain cautious even when headline economic indicators improve.
That can limit the strength of domestic consumption and make the benefits of economic recovery less visible to ordinary Nigerians.
INFLATION REMAINS A MAJOR CONCERN
Inflation continues to be one of the main factors influencing household sentiment.
Even when the rate at which prices are increasing begins to moderate, households may still be dealing with prices that are substantially higher than they were previously.
This distinction is important.
A slowdown in inflation does not necessarily mean that food, transportation, rent or other household expenses have become cheaper.
It simply means that prices are rising more slowly than before.
For families whose incomes have not increased sufficiently, the accumulated effect of previous price increases can continue to reduce purchasing power.
This helps explain why households can remain pessimistic even when businesses report stronger activity.
Consumers may therefore continue to prioritise essential spending, postpone major purchases and seek cheaper alternatives.
BUSINESSES STILL FACE HIGH OPERATING COSTS
The latest survey also highlighted continuing challenges for Nigerian businesses.
Taxation, insecurity and high interest rates were among the major constraints identified by businesses.
These factors can affect companies in different ways.
High interest rates increase the cost of borrowing and can discourage businesses from taking loans to expand factories, purchase equipment or increase inventories.
For smaller enterprises with limited access to affordable financing, the effect can be particularly severe.
Taxation also remains an important concern.
While taxes provide governments with revenue required to fund public services and infrastructure, businesses can face difficulties when multiple taxes, levies and administrative requirements increase the cost and complexity of operating formally.
For businesses already dealing with expensive energy, transportation and financing, additional operating costs can reduce margins and discourage expansion.
INSECURITY CONTINUES TO AFFECT ECONOMIC ACTIVITY
Insecurity remains another important obstacle to stronger economic performance.
Businesses operating in areas affected by criminal activity, attacks or other forms of insecurity may face higher security expenses and interruptions to their operations.
Farmers can be particularly vulnerable because insecurity can prevent access to farmland, disrupt the movement of agricultural products and discourage investment in affected communities.
Transportation companies and traders can also face additional costs when they operate along routes where security concerns are elevated.
These challenges can ultimately feed into consumer prices.
When businesses spend more money protecting employees, goods and facilities, those additional costs can be reflected in the prices paid by consumers.
Improving security therefore has an economic dimension that extends beyond law enforcement.
HIGH INTEREST RATES REMAIN A CREDIT BARRIER
The latest findings come shortly after the Central Bank of Nigeria reduced its benchmark Monetary Policy Rate from 26.5 per cent to 23 per cent.
The reduction represents a major shift in monetary policy and is intended to support economic activity while maintaining attention on inflation and financial stability.
However, lower policy rates do not immediately translate into equally large reductions in the interest rates paid by businesses and consumers.
Commercial banks still consider funding costs, credit risk, capital requirements, operating expenses and other factors when setting lending rates.
This means that many businesses may continue to face expensive borrowing even after the central bank has reduced its benchmark rate.
The effectiveness of the rate cut will therefore depend partly on how strongly it is transmitted through the banking system.
If lending rates eventually decline, businesses could have greater capacity to invest and expand.
If credit remains expensive, the impact of the policy change on the real economy could be more limited.
CONSUMER BORROWING PROVIDES ANOTHER WARNING SIGN
Separate data reported on Monday showed that Nigerians' personal loans reached an estimated N2.06 trillion in May.
The figure represented approximately 64.78 per cent of total consumer credit outstanding at the time.
Total consumer credit increased from N3.13 trillion in April to N3.18 trillion in May, representing an increase of about N50 billion in one month.
The increase in borrowing provides another indication of the financial pressure facing households.
Credit can be positive when it helps consumers acquire productive assets, invest in education or finance businesses that generate income.
However, increasing reliance on borrowing to meet everyday expenses can create repayment pressure, particularly when household income remains under strain.
The development therefore adds another layer to the contrast between improving macroeconomic indicators and the experience of individual households.
ECONOMIC RECOVERY NEEDS TO REACH HOUSEHOLDS
The latest data raise an important question about the quality of Nigeria's economic recovery.
Economic expansion is valuable, but sustained improvement in living standards requires growth that generates jobs, raises real incomes and improves the ability of households to afford essential goods and services.
If output increases while household purchasing power remains weak, the benefits of growth may be concentrated among particular sectors or groups.
For the recovery to become more broadly felt, businesses need an environment that encourages investment and job creation, while households need greater income stability and improved access to affordable essential services.
This requires more than monetary policy alone.
Infrastructure, electricity supply, transportation, security, taxation, access to finance and productivity all influence the cost of doing business and the ability of companies to employ more people.
PRODUCTIVITY WILL BE CRITICAL
Nigeria's next economic challenge is therefore likely to be moving from stabilisation toward stronger productivity growth.
Businesses need to produce more efficiently and competitively, while government policies need to reduce unnecessary barriers to investment.
Agriculture, manufacturing, services and technology all have the potential to contribute to broader economic expansion if the underlying operating environment improves.
Higher productivity can help businesses reduce costs and become more competitive, while increased investment can create employment and improve household incomes.
However, investment decisions depend heavily on confidence.
Businesses are more likely to invest when they have reasonable expectations about demand, financing costs, taxation, infrastructure and security.
THE CONSUMER WILL REMAIN CENTRAL
The condition of Nigerian households will remain an important test of the country's economic recovery.
Businesses ultimately depend on consumers to purchase their goods and services.
If households remain under financial pressure, they may reduce discretionary spending even when economic activity is technically expanding.
That can limit the strength of demand and make it harder for businesses to sustain growth over the longer term.
Improving household purchasing power is therefore not simply a social objective; it is also an important component of a sustainable private-sector economy.
WHAT TO WATCH NEXT
The coming months will show whether the September expansion in business activity can be sustained and whether stronger economic performance eventually improves household sentiment.
Investors and businesses will closely watch inflation, interest rates, exchange-rate stability, consumer demand, employment and the cost of operating in Nigeria.
The response of banks to the CBN's recent rate cut will also be important.
If borrowing costs decline meaningfully, businesses may have greater room to invest and expand.
If credit remains expensive, the benefits of monetary easing could take longer to reach the real economy.
Government efforts to address insecurity, simplify taxation and improve infrastructure will also influence the pace of recovery.
A MIXED ECONOMIC PICTURE
Nigeria's latest economic indicators therefore present neither a clear success story nor an outright failure.
The expansion in business activity is a positive development, particularly because it has extended across industry, services and agriculture.
At the same time, weakening household confidence and continuing pressure from inflation, taxation, insecurity and expensive credit show that significant challenges remain.
The central task for policymakers will be ensuring that improving macroeconomic stability translates into tangible improvements in the daily lives of Nigerians.
For businesses, the opportunity is to convert improving demand and supply conditions into higher investment, productivity and employment.
For households, the ultimate measure of recovery will be whether incomes begin to stretch further, essential costs become more manageable and financial security improves.
Until that happens, Nigeria's economic recovery is likely to remain a story of two different realities: stronger activity in the business sector alongside continued financial pressure for many households.