Nigerian Business community are hopeful that the economy will improve further according to the Central Bank of Nigeria Business expectation survey. Meanwhile money market report indicate that CBN’s daily foreign exchange intervention remains $0.5m at N305.10. According to the market report the turnover at the NAFEX foreign exchange window declined significantly from $572 million on Thursday to $259million.
According to the latest data from the CBN in its Business Expectation Survey report for February 2018 the business confidence index stood at 14.5 points indicating respondents’ overall optimism on the macro economy. The survey had a sample size of 472 businesses covering services, industry, wholesale/retail trade and construction. A response rate of 77.5 per cent was achieved. The business climate is largely linked to a country’s macroeconomic environment; there is now a more stable macroeconomic outlook and, by extension, an uptick in business confidence.
The optimism in February was driven by the opinion of respondents from the services sector 7.7 points and industrial sector 6.6 points while respondents from the construction sector represented just 0.3 points of the total confidence index. For the construction sector this is not surprising as its business confidence is primarily tied to capital budget releases from the federal government, particularly for projects within the ministry of power, housing and works. Historically, budget passage has been slow.
According to the survey access to credit stuck out as one of the major issues for businesses being surveyed. Lending rates remained high above 20 per cent from commercial banks, making it difficult for businesses to expand their operations. Access to credit for funds within the N500m – N1 billion range accounts for only 15 per cent of total lending by Nigerian banks. SMEs fall within this category. The outlook for the employment sub-index showed that the wholesale / retail sector carries the highest prospects for job creation at 25.0 points while services had 22.8 points. Drawing a parallel with FBNQuestResearch manufacturing Purchasing Managers Index, the employment sub-index for March showed expansion at 56.5, therefore mirroring the same trend.
Insufficient power supply was also cited as the major constraining factor on business activities, along with soft demand. As for inflation, the general expectation is for a slowdown in the headline rate for March. Inflation is expected to slow further to 13.5 per cent y/y, from 14.3 per cent in February.
The survey also captured outlook for business confidence in March. Based on data from respondents, the business confidence index is projected at 57.8 points. The positive outlook was driven largely by export-oriented businesses. Indications are that business confidence will maintain an upward trend while consumption trends, may see a positive trend but at a relatively slower pace as consumers remain cautious with their spending.
