Monday, April 09, 2018/09:58 AM / FBNQuest Research
latest data from the CBN in its Business Expectation Survey report for February
2018 show the business confidence index at 14.5 points (indicating respondents’
overall optimism on the macro economy). The survey had a sample size of 472
businesses covering services, industry, wholesale/retail trade and
response rate of 77.5% was achieved. The business climate is largely linked to
a country’s macroeconomic environment; there is now a more stable macroeconomic
outlook and, by extension, an uptick in business confidence.
The optimism in February was driven by the
opinion of respondents from the services (7.7 points) and industrial (6.6
points) sectors while respondents from the construction sector represented just
0.3 points of the total confidence index.
For the latter, this is not surprising as
business confidence for the sector is primarily tied to capital releases from
the national budget (particularly for projects within the ministry of power,
housing and works). Historically, budget passage has been slow.
Access to credit stuck out as one of the
major issues for businesses being surveyed. Lending rates remain high (above
20%) from commercial banks, making it difficult for businesses to expand their
operations. We understand that access to credit for funds within the N500m –
N1bn range accounts for only 15% of total lending by Nigerian banks. SMEs fall
within this category.
The outlook for the employment sub-index
showed that the wholesale / retail sector carries the highest prospects for job
creation at 25.0 points while services had 22.8 points. Drawing a parallel with
our manufacturing Purchasing Managers Index, the employment sub-index for March
showed expansion at 56.5, therefore mirroring the same trend.
Insufficient power supply was cited as the
major constraining factor on business activities, along with soft demand. As
for inflation, the general expectation is for a slowdown in the headline rate
for March. This is similar to our thinking. We expect the rate to slow to 13.5%
y/y, from 14.3% in February.
The survey also captured outlook for
business confidence in March. Based on data from respondents, the business
confidence index is projected at 57.8 points. The positive outlook was driven
largely by export-oriented businesses.
Our view is that business confidence will
maintain an upward trend. As for consumption trends, we see a positive trend
but at a relatively slower pace as consumers remain cautious with their
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