By Obinna Chima
The Central Bank of Nigeria’s (CBN) October 2020 Business Expectations Survey Report has once more identified insufficient power supply, financial challenges, high interest rate and competition as some of the factors constraining businesses in the country.
The report posted on the central bank’s website also identified unfavourable economic climate, unclear economic laws, unfavourable political climate, insufficient demand, access to credit and lack of equipment as other factors hampering business activities in the country.
It showed that while respondent firms expected that the naira to depreciate in October, they anticipated that the nation’s currency would strengthen between this month and the next six months. Also, inflation level was expected to rise in the next six to 12 months, while borrowing rate was expected to rise between this month and the next six months.
The October 2020 Business Expectations Survey was conducted online from October 12th and 16th, 2020 with a sample size of 1,050 businesses nationwide. A response rate of 89.4 per cent was achieved, and the sample covered the agric/services, manufacturing, wholesale/retail trade, and construction sectors
The respondent firms were made up of small, medium and large corporations covering both import-oriented and export-oriented businesses.
“At -1.5 index points, the overall confidence index (CI) on the macro economy was pessimistic in October 2020. However, respondents are optimistic in their outlook for November with a confidence index of 37.9. They also expressed optimism in the overall business outlook for December 2020 and April 2021 as shown in a greater confidence of the economy at 46.1 and 59.7 index points, respectively.
“The pessimism on the macro economy in the current month was driven by the opinion of respondents from agric./services (-3.1 points), construction (-0.7 points) and wholesale/retail trade sectors (-0.5 points). The major drivers of optimism for next month were agric./services (20.0 points) and manufacturing sectors (13.4 points).
“Further analysis revealed that businesses that are neither import nor export-oriented (-2.2 points) and import-oriented (-0.3 points), drove the negative business outlook for the month under review,” the report stated.
Respondents from the construction and wholesale/retail trade sectors expressed pessimistic opinions on own operations in the review month with outlook of -0.3 and -0.4, respectively, while those from manufacturing and agric./services sectors expressed positive confidence of 1.3 and 1.8 index points, respectively.
Respondents’ outlook on volume of total order, volume of business activity, average capacity utilisation and financial condition (working capital) were positive at 7.9, 46.1, 11.2 and 2.3 index points, respectively. However, their outlook on access to credit was negative at -2.1 index points in October 2020.