TUE, MARCH 05 2019-theG&BJournal- Insufficient power supply, high interest rate, unfavourable economic climate, financial problems, unfavourable political climate, unclear economic laws, insufficient demand and access to credit as are the big issues still causing businesses splitting headaches and these problems reflect so badly on their outlook for Naira, inflation and borrowing rates.
The issues were identified by businesses surveyed in the February 2019 Business Expectations Survey (BES) of the Central Bank of Nigeria (CBN) which was carried out during the period February 11-15, 2019 with a sample size of 1050 businesses nationwide.
The surveyed firms identified insufficient power supply (63.3points), high interest rate (55.2 points), unfavourable economic climate (55.2points), financial problems (53.0points), unfavourable political climate (51.8 points), unclear economic laws (48.9 points), insufficient demand (42.4points) and access to credit(41.4points) as the major factors constraining business activity in the current month.
Majority of the respondent firms expect the naira to appreciate in the current, next and the next twelve months as their confidence indices stood at 23.3, 32.6 and 54.7 index points respectively. Expectations on Borrowing Rates Respondent firms expect borrowing rates to rise in current, next and the next twelve months as the confidence indices stood at 17.6, 0.3 and 2.1points respectively.
The average expectation on inflation rate in the next six months and twelve months stood at 11.3 and 11.1percent, respectively.
But overall, Business confidence remains positive. Business executives expressed optimism on the overall confidence index (CI) on the macro economy in February 2019.
The businesses outlook for March 2019 showed greater confidence on the macro economy with 58.5index points. The optimism on the macro economy in the current month was driven by the opinion of respondents from services (12.9points), industrial (7.3points), wholesale/retail trade (1.0points)and construction sectors (0.8points).
Whereas the major drivers of the optimism for next month were services (33.4points), industrial (17.7points), wholesale/retail trade (5.3points) and construction sectors (2.1points).The positive outlook by type of business in February2019 were driven by businesses that are neither import-nor export-oriented (14.3points), import-oriented (4.0) points),both import-and export-oriented (3.2points), and those that are export-related (0.6points).
All sectors except the construction sector, expressed optimism on own operations in February 2019. Respondents from the services sector expressed the greatest optimism on own operation with an index of 8.8points, followed by the industrial sector with 3.4 points and then the wholesale and retail trade with 2.2 index points.
Respondents’ outlook on the volume of total order and business activity in February2019 remained positive, as the index stood at 15.9and 15.4points, respectively. Similarly, respondents’ outlook on financial conditions (working capital) and average capacity utilization was optimistic, as the indices stood at 14.4 and 21.7 index points, respectively. Respondents remained positive on access to credit in the review month, with an index of2.4points.
The positive outlook in the volume of business activities (64.4 index points) and employment (24.8 index points) indicated a favourable business outlook in the next month. The employment outlook index by sector showed that the services (26.1 points), indicates the highest prospects for creating jobs, followed by industrial sector (24.6points), wholesale/retail trade sector (22.5 points) and construction sector (12.5points).
The analysis of businesses with expansion plans by sector in the next month showed that the services sector indicates higher disposition for expansion with an index of27.1 points followed by wholesale/retail trade (10.0 points), both industrial and construction sectors (4.0points)apiece.
Respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) were positive during the review period.
Expectations on Economic Growth Rate Respondents were optimistic of better economic conditions as their expectations on the growth of the economy rose steadily in the short run with an index of 34.3, 45.7 and 63.3points for the current month, next six months and next twelve months, respectively.
More respondent firms are satisfied with the management of inflation by the Government with a net satisfaction index of 3.3 per cent in February 2019. The net satisfaction index is the proportion of satisfied less the proportion of dissatisfied respondents.
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