Market News

Nigeria: Unclear Economic Policies, Others Worry Business Operators - THISDAY

APRIL 16, 2018

By Obinna Chima

Some business operators have identified insufficient power supply, unclear economic policies,high interest rate, and unfavourable economic climate as major constraints to the growth of businesses in Nigeria.

The business operators also identified financial problems, insufficient demand and unfavourable political climate asother business constraints in a survey conducted by the Central Bank of Nigeria (CBN).

The central bank stated this in its monthly Business Expectations Survey Report for March 2018 that was posted on its website.

"The surveyed firms identified insufficient power supply (70.7 points), high interest rate (61.0 points), unfavourable economic climate (53.8 points), unclear economic laws (52.7 points), financial problems (50.5), insufficient demand (48.1 points), and unfavourable political climate (43.7 points) as the major factors constraining business activity in the current month," it stated.

Respondent firms however expressed optimism on the macro economy in March 2018 when compared with the level recorded in the preceding month.

According to the report, respondents' outlook on the volume of total order, business activity and internal liquidity positions (financial conditions) in the review month improved in relation to that of February 2018.


Similarly, they anticipated that the naira would appreciate in the current and next months as well as that inflation rate would fall in both months.

The March 2018 Business Expectations Survey (BES), was carried out during the period March 12-22, 2018 with a sample size of 650 businesses nationwide.

A response rate of 91.8 per cent was achieved, and the sample covered the services, industry, wholesale/retail trade and construction sectors.

The respondent firms were made up of small, medium and large organisations covering both import- and export-oriented businesses.

At 24.5 index points, respondents' overall confidence index (CI) on the macro economy in March 2018 improved when compared with the level of 14.5 index points recorded in February 2018.

"The businesses outlook for April 2018 indicated greater confidence on the macro economy at 64.1 index points.


"The optimism in the current month was driven by the opinion of respondents from services (13.9 points), industrial (7.5 points) construction (1.8 points) and wholesale/retail trade sectors (1.2), while the drivers of the optimism for next month were services (38.5 points), industrial (16.8 points), construction (4.9 points) and wholesale/retail trade (4.0 points) sectors.

Furthermore, the positive outlook by type of business in March 2018 was driven by businesses that are both import- and export-oriented (29.1 points), those that are neither import- nor export-oriented (25.9 points), businesses that are export-related (23.5 points), and those that are import-oriented (17.7 points).

Respondents from services, industrial, wholesale/retail trade and construction sectors expressed optimism on own operations in the current month with indices of 3.4, 2.2, 1.2 and 0.5, respectively when compared with 1.9, 2.5, -0.3 and -0.5 in February 2018, respectively.

"Respondents' outlook on the volume of total order, business activity and financial conditions (working capital) stood at 16.0, 13.3, and 7.6 index points respectively, indicating an improvement in relation to its outlook in February 2018 which was 2.2, 7.1, and 3.8 respectively.

"The average capacity utilisation (CUI) index rose to 16.5 points in March 2018 from 8.3 in February 2018, which can be attributed to the positive outlook on business activity and financial conditions.


"Respondents were however pessimistic on access to credit in the review month with an index of -12.2 points, which is a decline from the 7.2 point recorded in the preceding month," it added.

The survey showed that thepositive outlook in the volume of business activities (69.2 index points) and employment (27.9 index points) indicated a favourable outlook in the next month. Also, the employment outlook index by sector showed that the services sector (33.4 points) indicated that the highest prospects for creating jobs, followed by wholesale/retail trade (22.9 points), industrial (21.5 points) and construction (16.2 points) sectors.

An analysis of businesses with expansion plans by sector in the next month showed that the services and construction sectors indicate greater disposition for expansion with indices of 34.8 and 14.3 points respectively.

"Majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 26.7 and 40.8 points, respectively," it added.


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