Low Power Supply, High Interest, Others Constrain Businesses -CBN
The May 2019 Business Expectations Survey Report of the Central Bank of Nigeria (CBN) has identified insufficient power supply, high interest rate, unfavourable economic climate, financial problems and unclear economic laws as major factors that constrained business activity this month.
However, respondent firms expressed optimism on the macro economy in the month under review.
The central bank disclosed this in the report posted on its website at the weekend.
The survey report showed that respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) were positive during the review period. Respondent firms expected the naira to appreciate in the current month, next month and the next 12 months.
In addition, they anticipated that the level of inflation would moderate in both the next six months and the next 12 months; while borrowing rate was expected to rise in the current month, next month and next 12 months.
The May 2019 Business Expectations Survey (BES) was conducted from May 6th to 10th, 2019 with a sample size of 1050 businesses nationwide. A response rate of 97 per cent 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.
At 29.7 index points, respondents expressed optimism on the overall confidence index (CI) on the macro economy in the month of May 2019. The business outlook for June 2019 showed greater confidence on the macro economy with 62.7 index points.
The optimism on the macro economy in the current month was driven by the opinion of respondents from services (15.7 points), industrial (9.7 points), wholesale/retail trade (2.8 points) and construction (1.4 points) sectors. Whereas the major drivers of the optimism for next month were services (36.6 points), industrial (18.7 points), wholesale/retail trade (4.9 points) and construction (2.5 points) sectors.
“The positive outlook by type of business in May 2019 were driven by businesses that are neither import- nor export-oriented (20.8 points), both import- and export-oriented (5.3 points), import-oriented (3.0 points), and those that are export-related (0.7 points).
“All sectors expressed optimism on own operations in the review month. Respondents from the services sector expressed the greatest optimism on own operation with an index of 8.7 points, followed by the industrial sector with 3.0 points, the wholesale/retail trade with 0.8 points and the construction sector with 0.1 points, respectively,” the report stated.
In terms of financial conditions and access to credit, respondents’ outlook on the volume of total order and business activity in May 2019 remained positive, as both the indices stood at 15 points.
Similarly, respondents were optimistic in their outlook on financial conditions (working capital) and average capacity utilisation as the indices stood at 12.5 and 16.8 index points, respectively.
Respondents expressed pessimism on access to credit in the review month, with an index of -1.9 points.
“Respondent firms’ opinions on the volume of business activities (68.6 points) and employment (24.8 points) indicated a favourable business outlook in next month.
“The employment outlook index by sector showed that the wholesale/retail trade sector indicates higher employment expansion plans with an index of (25.9 points) followed by services sector (25.7 points), industrial sector (24.9 points) and construction sector (5.9 points),” it added.
The analysis of businesses with expansion plans by sector in the next month showed that the construction sector indicated higher disposition to expansion with an index of (29.4 points) followed by services sector (26.9 points), industrial sector (8.3 points) and wholesale/retail trade sector (5.9 points).
The surveyed firms identified insufficient power supply (69.3 points), high interest rate (56.4 points), unfavourable economic climate (55.2 points), financial problems (54.3 points), unclear economic laws (51.7 points), unfavourable political climate (48.3 points), insufficient demand (45.4 points) access to credit (44.4 points), competition (44.0 points) and lack of equipment (33.1 points) as the factors constraining business activity in the current month.
“Majority of the respondent firms expect the naira to appreciate in the current month, next month and next 12 months as their confidence indices stood at 28.5, 40.1 and 50.1 index points, respectively.
“Respondent firms expect borrowing rates to rise in the current and next months, as well as in the next 12 months as the confidence indices stood at 3.7, 2.4 and 6.9 points, respectively,” it added.