Despite concerns over recent decline in oil prices and looming global economic recession, the latest Central Bank of Nigeria’s (CBN) monthly Business Expectations Survey (BES) report shows that majority of respondent firms expect the naira to appreciate in the coming months.
According to the August 2019 BES report, which was posted on the apex bank’s website yesterday, majority of businesses in the country also expressed optimism on the macro economy in the current month.
Specifically, the report indicates that firms’ outlook on the volume of total order, business activity and financial conditions (working capital) were positive during the review period.
The report stated: “At 28.6 index points, respondents expressed optimism on the overall Confidence Index (CI) on the macro economy in the month of August 2019. The business outlook for September 2019 showed greater confidence on the macro economy with 64.7 index points.
“The optimism on the macro economy in the current month was driven by the opinion of respondents from services (15.4 points), industrial (10.1 points), wholesale/retail trade (2.4 points) and construction (0.7 points) sectors. For next month, the major drivers of the optimism were services (36.1points), industrial (20.7 points), wholesale/retail trade (6.0 points) and construction (1.9 points) sectors.
“The positive outlook by type of business in August 2019 were driven by businesses that are neither import- nor export-oriented (21.0 points); both import- and export-oriented (4.3 points); import-oriented (2.9 points), and those that are export-related (0.3 points).”
Continuing, the report said: “Respondents’ outlook on the volume of total order and business activity in August 2019 remained positive, as their indices stood at 12.7 and 14.3 points, respectively. Similarly, respondents were optimistic in their outlook on financial conditions (working capital) and average capacity utilization as the indices stood at 11.1 and 15.9 index points, respectively.
Respondents expressed optimism on access to credit in the review month, with an index of 2.9 points.”
Similarly, the report shows that respondent firms’ opinions on the volume of business activities (65.9 points) and employment (25.8 points) indicate a favourable business outlook for next month.
Furthermore, the employment outlook index by sector showed that the services sector indicates higher employment expansion plans in the next month, with an index of (28.9 points) followed by wholesale/retail trade (25.3 points), industrial sector (22.0 points) and construction sector (12.9 points).
In addition, the report reveals that the analysis of businesses with expansion plans by sector in September showed that the construction services sector indicates higher disposition to expansion with an index of (46.7 points), followed by services sector (30.3 points), industrial sector (17.6 points) while respondents in the wholesale/retail trade sector indicated no plans to expand their businesses (-1.8 points).
However, firms identified insufficient power supply, high interest rate, financial problems, unfavourable economic climate, unclear economic laws and unfavourable political climate as major factors constraining business activity in August 2019.
They also expect the level of inflation to increase slightly in both the next six months and the next 12 months while the borrowing rate is expected to rise in the current month, next month and the next 12 months.
Significantly, the respondents’ average expected inflation rate in the next six months and the next 12 months stood at 11.6 and 11.4 percent, respectively.