Business Confidence On Nigeria’s Macro-Economy For January Rise To 58.6 Index Points

Women at a fish market in Makoko slums in Yaba, Lagos, Nigeria, October 9th, 2009. The extensive slum is built on top of water, using timber and iron sheets; and it is inhibited by the fishing community who live in Nigeria as immigrants from the neighbouring countries in Ghana, Benin and Burkinafaso. PHOTO/STEPHEN MUDIARI

Nigerian macro-economic’ 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 December 2019 Business Expectations Survey was conducted from December 10-14, 2019 with a sample size of 1050 businesses nationwide. A response rate of 97.1 per cent was achieved, and the sample covered the services1, 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 30.3 index points, the overall confidence index (CI) indicated respondents’ optimism on the overall macro economy in the month of December 2019. The business outlook for January 2020 showed greater confidence on the macro economy, with 58.6 index points (Fig.2).

The optimism on the macro economy in the current month 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. Similarly, the major drivers of the optimism for next month were services (30.8 points), industrial (20.3 points), wholesale/retail trade (5.5 points) and construction (2.0 points) sectors (Fig. 3).

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) (Table 1) drove the positive business outlook in December 2019.

Business Confidence on Own Operations by Sector
All sectors expressed optimism on own operations in the review month. Respondents from the services sector expressed the greatest optimism on own operations, with an index of 9.0 points, followed by the industrial sector with 5.8 points, the wholesale/retail trade with 2.0 points, while the construction sector had 0.1 point

Financial Conditions and Access to Credit
Respondents’ outlook on the volume of total order and business activity in December 2019 remained positive, at 21.3 and 20.9 points, respectively. Similarly, respondents were optimistic in their outlook on financial conditions (working capital) and average capacity utilization, as the indices stood at 16.8 and 21.3 index points, respectively (Fig. 5).
Respondents expressed optimism on access to credit in the review month, with an index of 6.8 points.

Employment and Expansion Plans
Respondent firms’ opinions on the volume of business activities (62.2 points) and employment (25.9 points) indicated a favourable business outlook for the next month. The employment outlook index by sector showed that the wholesale/retail trade sector had the highest prospect for employment in the next month, 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 analysis of businesses with expansion plans by sector next month 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

Business Constraints
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 constraining business activity in the current month

Expectations on Exchange Rate
Respondent firms expect the naira to appreciate in the current month, next month and next twelve months, as their confidence indices stood at 26.7, 37.5 and 47.1 index points, respectively

Expectations on Borrowing Rates
Respondent firms expect borrowing rates to rise in the current month, next month and the next twelve months, as the confidence indices stood at 12.5, 8.0 and 9.9 points, respectively

Expectations on Level of Inflation
The respondents expect the average inflation rate in the next six months and the next twelve months to stand at 11.7 and 11.6 percent, respectively

Expectations on Economic Growth Rate
Respondents anticipate improvements in economic conditions, as the index of their expectation on economic growth rate in the short run stood at 34.5, 45.1 and 55.6 points for the current month, next six months and next twelve months, respectively

Opinion on Control of Inflation
Respondent firms expresed satisfaction with the management of inflation by the Government, with a positive net satisfaction index of 2.7 in December 2019. The net satisfaction index is the proportion of satisfied less the proportion of dissatisfied respondents