A look into how business in Nigeria has fared since President Tinubu's election

The performance of the business ecosystem in Nigeria, in 2023 is a subject of keen interest, as it plays a pivotal role in the country’s economic development and prosperity.

Nigeria’s private sector, comprising of businesses ranging from small and medium-sized enterprises (SMEs) to large corporations, has faced numerous challenges in recent years, but none more seemingly so than the country’s current foreign exchange rate.

On May 29, 2023, Bola Ahmed Tinubu was inaugurated as Nigeria’s new president and immediately got to work implementing some of the policies he had promised to enact. His economic initiatives began with the removal of the controversial fuel subsidies, which he announced would be removed immediately. Just then, fuel prices in the country went up from $0.26 to as high as $0.91 before flatlining to $0.80 (according to the Naira’s current exchange rate).

It goes without saying that the sharp increase in the cost of energy created an economic shock many Nigerians were not prepared for. Ultimately, inflation rose from 22.41% in May to 22.79% in June and now stands at an 18-year high of 25.8%.

The National Bureau of Statistics (NBS), notes that this increase in the inflation rate is largely a result of the president’s economic reforms. “The August inflation figure rose for an eighth straight month from July’s 24.08%, according to the National Bureau of Statistics (NBS), compounding a cost of living crisis worsened by Tinubu’s reforms,” the organization noted.

However, the removal of fuel subsidies is hardly the only work at play, as the president’s other major reform, the unification of the country’s currency rates, has devalued the Nigerian currency to its worst levels yet. Prior to the unification, Nigeria’s exchange rate against USD averaged 460.702 Naira (USD/NGN), it now averages 785.5 Naira per dollar, sometimes reaching as high as N1000.

With these complications in place, it is a wonder how the Nigerian private sector has fared, especially considering that the private sector plays a major role in generating revenue for the country. It is also important to note that the president has insisted that these two moves were the right decisions to make for Nigeria’s economic recovery.

Nigeria’s private sector

Nigeria’s private sector which cuts across financial services, manufacturing, telecoms, and consumer goods, in addition to the informal sector, and others has been a major contributor to Africa’s largest economy.

The top 35 of the companies comprising this sector, according to Nairametrics, a Nigerian business news publication, reported a combined N2.146 trillion in profits in 2023 so far against a total average of N12.1 trillion in shareholder funds. Additionally, the top ten of said companies accounted for 76% of the entire market with a joint value of N27.67 trillion. Eight of the ten companies are valued above N1 trillion.

This is a brief highlight of how much Nigeria’s private sector thrives. Some of the companies alluded to above include, GTCO, UBA, Zenith Bank, Okomu Oil, MTN Nigeria, Dangote Cement etc.

“Among the companies analyzed that recorded return on equity include, MTN Nigeria (+43.22%), Dangote Cement (+37.23%), Zenith Bank (+36.90%), Presco (+36.17%), Fidelity Bank (+34.90%), BUA Foods (+34.18%), FCMB (+33%), etc,” the report reads in part

According to Statista; “The domestic credit to the private sector as a share of GDP in Nigeria increased by 1.4 percentage points (+11.54 percent) in 2021 in comparison to the previous year. In total, the share amounted to 13.56 percent in 2021.”

Business performance in Nigeria in the past year

As the naira resumed regular circulation after two months of depreciation, business activity in Africa’s largest economy grew in April 2023, according to a Purchasing Managers’ Index (PMI) released in May 2023 the PMI stood at 54.0. However, the next month, the new president’s new reform began to take hold of Nigeria’s economy.

Purchasing Managers’ Index (PMI) is a survey-based economic indicator designed to provide a timely insight into business conditions. Business conditions are said to be improving when readings are above 50.0 and deteriorating when values are below 50.0.

In June, the PMI dipped slightly to 53.2, and in July, business activity in Nigeria hit its lowest in 4 months on rising prices with a PMI of 51.7. In August the PMI declined further to 50.2, and in September, the country’s PMI increased slightly to 51.1.



PMI after Tinubu’s election

However, it is interesting to note that there have been lower PMIs recorded in 2023, prior to April of the year. In March the headline PMI stood at 42.3 and 44.7 in February, both the lowest so far in the year, and both under the former administration. However, the two-month disappointing figures were preceded by better figures.

As of last year, September’s PMI stood at 53.7, the following month read 53.6, November figures were 54.3, and by the last month of the year, the country’s PMI stood at 54.6.

The first month of 2023 recorded 53.5 before declining in February and March and then picking back up in April.



Nigeria’s PMI before Tinubu

Despite the fact that an earlier report revealed that President Bola Ahmed Tinubu’s reforms have had some negative impact on the economic, the figures above demonstrate the since Tinubu took over, Nigeria’s PMI has not been alarming different from the months preceeding his inuguration.

This could be because the PMI is the sum average of over 400 businesses each able to mitigate loss to varying degrees, and as such, the impact and nuances on specific businesses and industries are not detailed.

A survey of 400 businesses in the sectors of manufacturing, services, construction, and retail led to the creation of the Index, which gauges how business in the country have been performing.

It is a composite index made up of five separate indices with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stock of Items Purchased (10%), with the Delivery Times index inverted so that it moves in a similar manner.

The PMIs listed above are from Business Day, a Nigerian financial media platform.