The Central Bank of Nigeria’s Monthly Business Expectations Survey Report for February has shown that stakeholders in the Small, Medium and Large Enterprises (SMLEs) sector are highly optimistic about Nigeria’s economic growth potentials in 2019.
According to the report, the business outlook shows greater confidence in Nigeria’s macroeconomy with some 58.5 index points for March 2019, as against 22.1 index points in February 2019.
The Business expectation survey covered about 1050 businesses nationwide, with a 97.4% response rate among small, medium and large corporations covering both import and export-oriented businesses in the country.
Respondents also expressed greater optimism for better economic conditions, which is why their growth expectations increased to 34.3, 45.7, and 63.3 index points for the current month, the next six months, and the next twelve months; respectively.
Note that stakeholders in the service sector expressed the most optimism for the macroeconomy. This is why they have the highest index points of 12.9. The service sector is then followed by the industrial sector (7.3 points), wholesale/retail trade (1.0 points) and construction sectors (0.8 points).
Some key highlights of the report
- All sectors except the construction sector expressed optimism on their operations in February 2019
- Respondents from the services sector expressed the greatest optimism on own operation with an index of 8.8 points, followed by the industrial sector with 3.4 points and then the wholesale and retail trade with 2.2 index point
- Respondents’ outlook on the volume of the total order, business activity and financial conditions (working capital) were positive during the review period.
Major business drivers
- Projections into next month business survey have revealed that the major drivers of the optimism for next month were services (33.4 points), industrial (17.7 points), wholesale/retail trade (5.3 points) and construction sectors (2.1 points)
- The positive outlook by type of business in February 2019 was driven by businesses that are neither import- nor export-oriented (14.3 points). Also, import-oriented (4.0 points), both import- and export-oriented (3.2 points), and those that are export-related.
- 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 63.3 points for the current month, next six months and next twelve months, respectively
Challenges for businesses
Respondents expect inflation to rise in both the next six months and the next twelve months; borrowing rates to rise in the current month, next month and the next twelve months.
Firms also identified insufficient power supply, high-interest rate, unfavourable economic climate, financial problems, unfavourable political climate, unclear economic laws, insufficient demand and access to credit as major factors constraining business activity in the current month.
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 2.1 points
Opportunities for growth
Respondents’ outlook on financial conditions (i.e., working capital) and average capacity utilisation was optimistic, as the indices stood at 14.4 and 21.7 index points. Respondents also remained positive on access to credit in the review month, with an index of 2.4 points.
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 (24.6 points), wholesale/retail trade sector (22.5 points) and construction sector (12.5 points)
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 of 27.1 points followed by wholesale/retail trade (10.0 points), both industrial and construction sectors (4.0 points) apiece
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.