Firms Express Confidence in Nigeria’s Economy
Nume Ekeghe
The Central Bank of Nigeria’s (CBN) Business Expectations Survey (BES) for June 2018, has revealed that firms have expressed more optimism in the macroeconomy.
Also, respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) remained positive during the review period. The report however showed that firms identified insufficient power supply, high interest rate, unfavourable economic climate, financial problems, unclear economic laws, insufficient demand and unfavourable political climate as the major factors constraining business activity in the current month.
Respondent firms expected that the naira would appreciate this month as well as in the coming months; inflation rate to fall and borrowing rates to rise. The BES report which was published on the CBN’s website recently had a response rate of 87.5 per cent and services, industry, wholesale /retail trade and construction sectors.
It stated that: “At 34.7 index points, respondents’ overall confidence index (CI) on the macro economy in June 2018 improved when compared with the level of 28.9 index points recorded in May 2018. The businesses outlook for July 2018 shows a greater confidence on the macro economy at 64.9 index points.
“The optimism on macro economy in the current month was driven by the opinion of respondents from services (20.5 points), industrial (9.3 points) construction (2.6 points) and wholesale/retail trade sectors (2.3), while the drivers of the optimism for next month were services (37.8 points), industrial (19.5 points), wholesale/retail trade (3.9 points) and construction (3.7 points) sectors.”
Furthermore, the report showed a positive trend in the outlook by type of business in June 2018 which was driven by businesses that are neither import- nor export-oriented (22.6 points), import-oriented (6.0 points) both import- and export-oriented (5.8 points), and those that are exportrelated (0.5 points).
According to the report, respondents’ outlook on the volume of total order and business activity in June 2018 was more optimistic, as the index stood at 16.4 and 16.1 points, respectively when compared to 15.1 and 16.1 points, respectivly recorded in the previous month. Similarly, respondents’ outlook on financial conditions (working capital) and average capacity utilisation improved, as the indices stood at 11.7 and 23.4 index points, respectively when compared with the 14.1 and 22.7 points, respectively recorded in May 2018. The improvement in the average capacity utilisation (CUI) index was attributed to the positive outlook on financial conditions.
Respondents were more optimistic on access to credit in the review month, with an index of 4.4 points.
It showed that the positive
outlook in the volume of business activities (66.7 index points) and employment (27.0 index points) indicated a favourable outlook this month. The employment outlook index by sector showed that the services sector (28.7 points) indicates the highest prospects for creating jobs, followed by industrial (26.4 points), wholesale/retail trade (25.0 points) and construction (16.7 points) sectors.
On exchange rate expectations, it stated: “Majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 29.5 and 44.6 points, respectively.