Businesses’ confidence on economy in January rises 58.6 index points

Nigerian firms’ outlook for January 2020 showed greater confidence on the macro economy, with 58.6 index points.

The major drivers of the optimism for January were services (30.8 points), industrial (20.3 points), wholesale/retail trade (5.5 points) and construction (2.0 points) sectors.

The Business Expectations Survey (BES) of the Central Bank of Nigeria (CBN) also showed that confidence index (CI) on the overall macro economy in the month of December 2019 by companies stood at 30.3 index points.

“Domestic economic recovery remained positive regardless of prevailing global headwinds,” Godwin Emefiele, CBN governor, said in his personal statement at the last Monetary Policy Committee (MPC) meeting in November.

For the domestic economy, short-term outlook remained modest, as output growth recovery is expected to trudge on beyond 2019, Emefiele said.

Year-end growth for 2019 is projected at about 2.3 percent by the International Monetary Fund (IMF) and 2.2 percent by in-house estimates.

The December 2019 Business Expectations Survey was conducted by the CBN from December 10-14, 2019 with a sample size of 1,050 businesses nationwide. A response rate of 97.1 percent was achieved, and the sample covered the services, industrial, wholesale/retail trade, and construction sectors.

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

The optimism on the macro economy in December was driven by the opinion of respondents from services (16.3 points), industrial (9.8 points), wholesale/retail trade (3.2 points) and construction (1.0 points) sectors.

Further analysis showed that businesses that are neither import- nor export-oriented (21.2 points), both import- and export-oriented (5.2 points) import-oriented (3.6 points), and those that are export-related (0.6 point) drove the positive business outlook in December 2019.

Respondent firms’ opinions on the volume of business activities (62.2 points) and employment (25.9 points) indicated a favourable business outlook for January. The employment outlook index by sector showed that the wholesale/retail trade sector had the highest prospect for employment in January, with an index of (29.8 points) followed closely by construction sector (29.7 points), services sector (25.9 points) and industrial sector (24.5 points).

“The economy needs greater diversification and interventions to stimulate growth that can reduce the very high rate of unemployment and make a dent on the high incidence of poverty,” Mike Idiah Obadan, member of the MPC, said in his personal statement.

The analysis of businesses with expansion plans by sector in January showed that the services sector indicates the highest disposition to expansion, with an index of 34.1 points. The industrial sector had an index of 15.0 points, the wholesale/retail trade sector had 14.8 points, and the construction sector had an index of 14.3 points.

However, respondent firms identified insufficient power supply (66.1 points), high interest rate (59.1 points), financial problems (53.8 points), unfavourable economic climate (53.2 points), unclear economic laws (52.3 points), unfavourable political climate (47.0 points), insufficient demand (44.9 points), competition (44.2 points) and access to credit (42.7 points) as major factors that constrained business activity in December.

HOPE MOSES-ASHIKE