| Nigeria Economy |    2005 VIEWS  |
| Nigeria Economy | |
| 2005 VIEWS | |
 |
Monday,
December 28, 2020 /02:25 PM / By CBN/ Header Image Credit: CBN
Highlights
2.0 Introduction
The December 2020 Business Expectations Survey was
conducted online from December 7-11, 2020 with a sample size of 1050 businesses
nationwide. A response rate of 91.3 per cent was achieved and the sample
covered the agric./services1 , manufacturing, wholesale/retail trade and
construction sectors (Fig. 1a, Table 1). The respondent firms were made up of
small, medium and large corporations covering both import-oriented and
export-oriented businesses (Figs. 1b and 1c, Table 1).
3.0
Business Outlook
At -15.2 index points, the overall confidence index
(CI) on the macro economy was pessimistic in December 2020. However,
respondents are optimistic in their outlook for the month of January 2021 with
a confidence index of 29.4. They also expressed optimism in the overall business
outlook for February and June 2021 as shown in a greater confidence of the
economy with 39.2 and 55.2 index points, respectively (Fig.2).
The pessimism on the macro economy in the current
month was driven by the opinion of respondents from agric./services (-10.4
points), wholesale/retail trade sectors (-1.7), construction (-1.6 points) and
manufacturing sectors (-1.6 points). The major drivers of optimism for next
month were agric./services (16.8 points) and manufacturing sectors (10.3
points) (Fig. 3, Table 1).
Further analysis revealed that businesses that are neither import and export-oriented (-9.5 points), both import and export-oriented (-3.4 points), importers(-2.0 points) and exporters(-0.2 points), drove the negative business outlook for the month under review.
3.1 Business Confidence on Own Operations by Sector
Respondents from three sectors of the economy expressed optimism on own operations in the review month with confidence index of 3.2, 2.5, and 0.2 for agric./services, manufacturing and construction sectors, respectively. However, wholesale/retail trade sector was pessimistic at -0.3 index points (Fig 4, Table 1).
3.2 Financial Conditions, Access to Credit and Installed Capacity
Respondents' outlook on volume of business activity,
average capacity utilization, volume of total order and financial condition
(working capital) were positive at 39.2, 11.2, 8.2 and 5.3 index points
respectively, in December 2020 (Fig. 5).
3.3 Employment and Expansion Plans
Respondent firms' opinion on the volume of business
activities indicated a favourable business outlook for January and February
2021 with indices of 47.7 and 55.0, respectively. Businesses also hope to
employ in January and February 2021 as the outlook was positive at 18.5 and
21.5 index points, respectively.
The break down by sector showed that the
Agric/services sector with (20.5 points) has the highest prospect for
employment in the next month, followed by construction sector with an index of
17.9 points, manufacturing sector (16.7 points) and wholesale/retail trade
(13.4 points) (Fig. 6, Table 1).
Respondents were also optimistic about the volume of
business activity and employment outlook index in the next 6 months as all
indices were positive.
An analysis of businesses with expansion plans in
January showed that the Agric/services sector and construction sector have the
highest disposition to expand with 52.9 index points each. Manufacturing and
Wholesale/retail sectors had an index of 46.6 and 41.2 respectively (Fig. 7,
Table 1).
3.4 Business Constraints
Respondent firms identified insufficient power supply
(68.3), unfavourable economic climate (65.7) competition(64.8), high interest
rates ( 64.5) unclear economic laws (62.7), financial problems (61.9),
unfavourable political climate (59.4), access to credit (53.1) insufficient
demand (49.3), lack of equipment (41.5) lack of materials input (41.1) and
labour problems (27.87) as major factors constraining business activity in the
current month (Fig. 8, Table 1).
3.5 Expectations on Exchange Rate
Respondent firms expect the naira to depreciate in the current month and next month but appreciate in the next 2 months and next 6 months, as their confidence indices stood at -24.1, -3.8, 9.9 and 30.5 index points, respectively (Fig. 9, Table 1)
3.6 Expectations on Borrowing Rates
Respondent firms expect borrowing rates to rise in the current month, next month, next 2 months and the next 6 months with indices of 19.2, 14.9, 14.7 and 14.3 points, respectively (Fig. 10, Table 1).
3.7 Expectations on Level of Inflation
Firms expect the average inflation rate in the next six months and the next twelve months to stand at 13.24 and 14.51 percent, respectively (Fig. 11, Table 1).
3.8 Expectations on Economic Growth Rate
Respondents anticipate increase in economic conditions as the index on economic growth rate in the short run stood at 5.9, 19.2,27.6 and 41.9 points for the current month, next month, next 2 months and next 6 months, respectively (Fig. 12, Table 1).
3.9 Opinion on Control of Inflation
Respondent firms expressed dissatisfaction with the
management of inflation by the Government with a negative net satisfaction
index of -33.5 in December 2020. The net satisfaction index is the proportion
of satisfied less the proportion of dissatisfied respondents (Fig. 13,Table 1).
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