Nigerian businesses doubt macroeconomic environment amid rising activity level
By Charles Abuede
Report shows firms expect naira to depreciate before the end of 2020
A new survey by the Central Bank of Nigeria on business expectations shows that Nigerian businesses are still pessimistic about the macro economy despite their expression of positivity on the outlook for business activity level, the average utilization of capacity, total orders and financial or capital conditions.
The business expectations report also revealed that they expect to see a fall in the local currency (Naira) in the current month (December) but modest appreciation in the first two to six months in 2021.
The monthly publication from the statistics department of the CBN took into survey over one thousand businesses countrywide made up of small, medium and large firms covering both imports and export-oriented businesses in the agriculture, services, manufacturing, whole and retail trade and constructions sectors.
Results from the surveyed responses show that the overall confidence index (CI) on the macroeconomy was pessimistic in December 2020. However, respondents are optimistic in their outlook for the month of January 2021.
A further analysis revealed that businesses that are neither import and export-oriented, both import and export-oriented, importers, and exporters, drove the negative business outlook for the month under review.
On the plans for employment and expansion by firms, the report revealed that businesses hope to employ in January and February 2021 due to the indication of a favourable business outlook. The break down by sector showed that the agriculture/services sector has the highest prospect for employment in the next month, followed by construction sector, manufacturing sector and wholesale/retail trade.
An analysis of businesses with expansion plans in January showed that the agriculture/services sector and construction sectors have the highest disposition to expand with manufacturing and wholesale/retail sectors showing weak plans.
According to the CBN, Nigerian businesses have identified insufficient power supply, unfavourable economic climate, competition, high-interest rates, unclear economic laws, financial problems, unstable political environment, access to credit, low or insufficient demand, lack of equipment, lack of materials input and problems of labour to be the major factors constraining or hindering business activities. The apex bank report showed.
On the expectations on the exchange rate, business firms expect the naira to depreciate in the month of December, and at the start of the New Year but to appreciate in the next two months and next six months. Meanwhile, the borrowing interest rates are expected to continue rising until the end of the first half of 2021. Also, with an anticipated increase in economic conditions, businesses are expectant of a continuous rise in the rate of economic growth during the yuletide, and in the first six months of 2020. However, there was an expression of dissatisfaction in the management of inflation by the fiscal and monetary authorities as the firms indicated in the CBN report that inflation rate is expected to averagely trickle-down moderately to 13.24 in the first half of 2021 as the economic indicator is expected to average 14.51 per cent annually by the close of 2021.