- Business Confidence Inching Up
At -1.5 index points, respondents’ overall Confidence Index in the Central Bank of Nigeria’s (CBN) Business Expectations Survey Report on the macro economy in second quarter (Q2) 2017 was less pessimistic, when compared with the level recorded in Q2 2016.
This was driven by the opinion of respondents from industrial (1.2 points), wholesale/retail trade (-0.6 points) and construction (-0.5 points) sectors.
The outlook of businesses for the third quarter 2017, however, indicated greater confidence on the macro economy at 47.5 points.
The drivers for this optimism were services (19.9 points), wholesale/retail trade (12.2 points), industrial (11.6 points) and construction (5.3 points) sectors (Fig. 2).
Furthermore, outlook by type of business in last quarter was driven by import-oriented businesses (-1.8 per cent), neither import nor export kind of businesses (-0.2 per cent), and both import- and export-related businesses (-0.1 per cent), while the sole driver by size of business was the small sized business (-3.2 per cent).
According to the central bank, the Q2 2017 Business Expectations Survey (BES) was carried out during the period May 22 to June 03, 2017, with a sample size of 1,950 businesses nationwide.
It explained that a response rate of 98.8 per cent was achieved during the reporting quarter, and covered the services, industry, wholesale/retail trade and construction sectors.
The services sector was made up of Financial Intermediation, Hotels and Restaurants, Renting and Business activities, and Community and Social Services.
The respondents firms were made up of small, medium and large organisations covering both import- and export-oriented businesses.
The report showed that respondents from the services, construction and wholesale/retail trade sectors expressed more optimism on own operations in the current quarter with indices of 1.1, 0.3, and 0.3, when compared with 0.5, -1.2, and -1.6 in the corresponding quarter of 2016, respectively.
Access to Credit
Respondents’ outlook in the volume of total order though negative, increased by 17 points above its level in the preceding quarter, leading to increases in the business activity and their internal liquidity positions (financial conditions). Similarly, their expectations of access to credit improved during the period under review.
Employment and Expansion Plans
At 56.8 and 29.7 index points, the positive outlook in the volume of business activities and employment index, respectively indicated a favourable outlook in the next quarter.
The employment outlook index by sector showed that the services sector (32.1 per cent) indicated higher prospects for creating jobs, followed by construction (31.0 per cent), wholesale/retail trade (30.7 per cent) and industrial (24.8 per cent) sectors.
“An analysis of businesses with expansion plans by sector in the next quarter showed that the wholesale/retail trade indicates disposition for expansion with an index of 58.7 points.
“Similarly, services, construction and industrial sector firms registered expansion plans for Q2 2017 with indices of 58.5, 57.4 and 50.6 points, respectively,” it stated.
Business Constraints
According to the report, the surveyed firms identified insufficient power supply (66.9 per cent), financial problems (58.0 per cent), high interest rate (53.6 per cent), unfavourable economic climate (52.5 per cent), competition (41.6 per cent), unclear economic laws (40.7 per cent), unfavourable political climate (40.5 per cent) and access to credit (40.0 per cent) as the major factors constraining business activity in the current quarter.
Majority of the respondent firms expected the naira to appreciate as the confidence indices stood at 3.4 and 18.4 points, respectively. Respondents’ expectations could be ascribed to the CBN’s recent policy intervention in the foreign exchange market.
Respondent firms expect inflation rate to rise in the current quarter but moderate in the next quarter, with confidence indices of 12.4 and -6.4 points for the current and next quarters, respectively.
Similarly, respondent firms expect the borrowing rate to rise in the current quarter, but decline in the next quarter as the confidence indices stood at 8.6 and -0.7 points, respectively.
Consumer Expectations Survey
Also, the highlights of the Q2 2017 Consumer Expectations Survey (CES) showed that overall outlook of consumers moderated in the current quarter though remained down beat. This was attributable to an anticipated consumer confidence in the economy, with an expected draw down on their savings /getting into debt and a decline in net household income.
Consumers however, had a positive outlook for the next quarter and the next 12 months.
On average, more households nationwide expect some increase in their expenditure on basic commodities and services in the next 12 months. Consumers expect to spend substantial amounts of their income on food and other household needs, education, savings, purchase of consumer durables, medical expenses and investment.
Majority of consumers nationwide believe that the next 12 months would not be an ideal time to purchase big-ticket items like motor vehicle and house & lot.
Most respondents expected that borrowing rate will fall and naira will appreciate in the next 12 months, while inflation and unemployment rates will rise.
The major drivers of the expected upward movement in prices are: house rent, education, medical care, transport and electricity.
The Consumer Expectations Survey (CES) for Q2 2017 was conducted during the period May 22—June 3, 2017 covering a sample size of 1,950 households drawn from the National Bureau of Statistics (NBS) Master Sample List of Households.
The overall response rate for the Q2 2017 CES was 98.9 per cent. The distribution of respondents by educational attainment showed that 47.3 per cent had university education, 27.6 per cent had higher but non-university education, while 15.5 per cent had senior secondary school education. Respondents with primary and junior secondary school education accounted for 3.0 and 4.1 per cent, respectively; while those with no formal education accounted for the balance of 2.5 per cent.
The consumers’ overall confidence outlook moderated in Q2 2017 while still remaining down beat.
Though, the index stood at -17.0, the proportion of respondents that are optimistic about the economy increased when compared with the corresponding quarter of 2016.
While some of the respondents attributed this moderation in their outlook to increased confidence in the economy, majority ascribed the development to a decline in their net income, leading to draw-down on savings/getting into debt. The consumer outlook for the next quarter and that of the next 12 months were however, positive at 21.3 and 34.2 points, respectively.
The outlook could be attributed to the anticipated improvement in Nigeria’s economic conditions, expected increase in net household income, and expectations to save a bit and/or have plenty over savings in the next 12 months.
With an average index of 14.3 points, more households nationwide expect some increase in their expenditure on basic commodities and services in the next 12 months. Majority of consumers expect to spend a substantial amount of their income on food and other household needs, education, savings, purchase of consumer durables, medical expenses and investment. However, they do not plan to expend on large ticket items such as purchases of car/motor vehicle and house.
Most respondents expect the prices of goods and services to rise in the next 12 months with an index point of 23.1. The major drivers are: house rent, education, medical care, transport and electricity.
The overall buying conditions index for consumers in the current quarter for big-ticket items stood at 38.2 points. This indicates that majority of consumers believed that the current quarter was not the ideal time to purchase big-ticket items like consumer durables, motor vehicles, and house & lot.
Similarly, buying intention index for consumer durables such as furniture, gas cooker, refrigerator, air conditioner, television and other durables in the next 12 months stood at 48 index points, indicating that majority of consumers believed that the next 12 months would not be an ideal time to purchase motor vehicles and house & lot.
Contrarily, the buying intention index for the big-ticket items like consumer durables were above 50 points, indicating that the next twelve months would be an ideal time to purchase these items.
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