Nigeria: Firms Foresee Positive Economic Outlook in August - CBN Survey

31 July 2020

A Central Bank of Nigeria (CBN) survey has shown that firms are optimistic in their outlook on the economy in August with a confidence index of 33.7, away from negative outlook of -7.9 index points they expressed on the economy in July.

The survey also showed that firms projected inflation rate to hit 13.92 percent by December 2020 up from 12.56 percent in June, while expressing dissatisfaction on how the government is managing inflation in the country.

In its Business Expectation Survey Report for July, the apex bank said:"At -7.9 index points, the overall confidence index (CI) indicated respondents' pessimism on the overall macro economy in the month of July. However, respondents are optimistic in their outlook for August with a confidence index of 33.7.

"Furthermore, they expressed optimism in the overall business outlook in September, 2020 and January 2021 as shown in a greater confidence of the economy, at 45.5 and 62.4 index points, respectively.

"The pessimism on the macro economy in the current month was driven by the opinion of respondents from agric/services (-4.8 points), manufacturing (-2.9 points) and the construction sector (-0.5 point).

"The major drivers of optimism for next month were agric/services (20.1 points), manufacturing (10.0 points), wholesale/retail (2.4 points) and construction (1.2 point).

"Further analysis showed that businesses that are neither import nor export-oriented (-5.6 points), import-oriented (-1.8 point), export-oriented (-0.4 point), and both import- export-oriented (-0.2 point) drove the negative business outlook in July 2020."

On inflation, the report stated: "Respondent firms expressed dissatisfaction with the management of inflation by the government, with a negative net satisfaction index of -14.9 in July 2020.

"Firms expect the average inflation rate in the next six months and the next twelve months to stand at 13.92 and 13.95 percent, respectively.The net satisfaction index is the proportion of satisfied less the proportion of dissatisfied respondents.

"Respondent firms expect borrowing rates to rise in the current month, next month, next two months and the next six months, as the confidence indices stood at 10.5, 10.5, 15.7 and 16.1 points, respectively."

According to the regulator, "Respondent firms identified insufficient power supply (68.5 points), competition 62.5 unfavourable economic climate (62.0 points), financial problems (60.7 points), high interest rate (60.5 points), unclear economic laws (57.9 points), unfavourable political climate (52.8 points), insufficient demand (52.4points), access to credit (50.7 points) and lack of equipment (38.2 points) as major factors constraining business activity in the current month."

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