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Nigeria: Monthly Business Expectations Survey Report - March 2018

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Nigeria: Monthly Business Expectations Survey Report - March 2018

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  1. Central Bank of Nigeria Statistics Department Monthly Business Expectations Survey Report March 2018
  2. Table of Contents Page 1 .0 Highlights 2 2.0 Introduction 2 3.0 Business Outlook 3 3.1 Business Confidence on Own Operations by Sector 3 3.2 Financial Condition and Access to Credit 4 3.3 Employment and Expansion Plans 4 3.4 Business Constraints 5 3.5 Expectations on Exchange Rate 5 3.6 Expectations on Inflation and Borrowing Rates 5 List of Figures Fig. 1a: Distribution of Respondent Firms by Sector 2 Fig. 1b: Distribution of Respondent Firms by Employment Size 2 Fig. 1c: Distribution of Respondent Firms by Type of Business 2 Fig. 2: Overall Business Outlook on the Macro-economy 3 Fig. 3: Sectoral Contributions to the Overall Business Outlook Index 3 Fig. 4: Business Confidence Index on own operations by Sector 3 Fig. 5: Business Outlook Index on own operations 4 Fig. 6: Employment Outlook Index on own Operations by Sector 4 Fig. 7: Businesses with Expansion Plans 4 Fig. 8: Business Constraints 5 Fig. 9: Business Expectation Index on Selected Economic Indicators 5 Annexes Table 1: Business Expectations Survey data 6
  3. A Monthly Publication of the Central Bank of Nigeria 1 .0 March 2018 Highlights The highlights of the outcome of the Business Expectations Survey in March 2018 are as follows:     2.0 Respondent firms expressed more optimism on the macro economy in March 2018 when compared with the level recorded in the preceding month. Respondents’ outlook on the volume of total order, business activity and internal liquidity positions (financial conditions) in the review month improved in relation to that of February 2018. Firms identified insufficient power supply, high interest rate, unfavourable economic climate, unclear economic policies, financial problems, insufficient demand and unfavourable political climate as the major business constraints in the review period. Respondent firms expect the Naira to appreciate in the current and next months; inflation rate to fall in both months; and borrowing rates to rise in the current month but fall in the next month. Introduction The March 2018 Business Expectations Survey (BES) was carried out during the period March 12-22, 2018 with a sample size of 650 businesses nationwide. A response rate of 91.8 per cent was achieved, and the sample covered the services, industry, wholesale/retail trade and construction sectors1. (Fig. 1a, Table 1) Services Sector 56% Industrial Sector 32% Construction Sector 6% Wholesale and Retail Trade 6% The respondent firms were made up of small, medium and large organisations covering both import- and export-oriented businesses (Figs.1b and 1c, Table 1). Fig. 1a: Distribution of Respondent firms by Sector Importer 21% Large (200 and Up) 22% Small (<50) 39% Medium (50 and <200) 39% Exporter 3% Neither Importer nor exporter 62% Both Importer and Exporter 14% Fig. 1c: Percentage Distribution of Respondent Firms by Type of Fig. 1b: Percentage Distribution of Respondent firms by Employment The services sector is made up of Financial Intermediation, Hotels & Restaurants, Renting & Business activities and Community & Social Services 1 2
  4. 3 .0 Business Outlook At 24.5 index points, respondents’ overall confidence index (CI) on the macro economy in March 2018 improved when compared with the level of 14.5 index points recorded in February 2018. The businesses outlook for April 2018 indicated greater confidence on the macro economy at 64.1 index points. (Fig. 2). Next Month 64.1 Current Month 24.5 0 10 20 30 40 50 60 70 Confidence Index Fig. 2: Overall Business Outlook on the Macroeconomy The optimism in the current month was driven by the opinion of respondents from services (13.9 points), industrial (7.5 points) construction (1.8 points) and wholesale/retail trade sectors (1.2), while the drivers of the optimism for next month were services (38.5 points), industrial (16.8 points), construction 45 Current Month Next Month (4.9 points) and wholesale/retail trade 40 38.5 (4.0 points) sectors (Fig. 3). 35 30 25 Furthermore, the positive outlook by type of business in March 2018 was driven by businesses that are both import- and export-oriented (29.1 points), those that are neither importnor export-oriented (25.9 points), businesses that are export-related (23.5 points), and those that are importoriented (17.7 points) (Table 1). 3.1 20 16.8 13.9 15 10 7.5 4.9 5 4.0 1.8 1.2 0 Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector Fig. 3: Sectoral contributions to the overall business outlook index Business Confidence on Own Operations by Sector Respondents from services, industrial, wholesale/retail trade and construction sectors expressed optimism on own operations in the current month with indices of 3.4, 2.2, 1.2 and 0.5, respectively when compared with 1.9, 2.5, -0.3 and -0.5 in February 2018, respectively (Fig 4, Table 1). 3.4 February 2018 March 2018 2.5 2.2 1.9 1.2 0.5 -0.5 Industrial Sector Construction Sector -0.3 Wholesale and Retail Trade Services Sector Fig. 4: Business confidence index on own operations by sector 3
  5. 3 .2 Financial Condition and Access to Credit Respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) stood at 16.0, 13.3, and 7.6 index points respectively, indicating an improvement in relation to its outlook in February 2018 which was 2.2, 7.1, and 3.8 respectively. (Table 1). The average capacity utilization (CUI) index rose to 16.5 points in March 2018 from 8.3 in February 2018 (Fig. 5, Table 1), which can be attributed to the positive outlook on business activity and financial conditions. February 2018 16.0 March 2018 16.5 13.3 8.3 7.6 7.1 3.8 2.2 -7.2 -12.2 Volume of Volume of Total Business Activity Order Book Index Index Credit Access Index Financial Average Capacity Condition Index Utilization Fig. 5: Business Outlook Index on Own Operations Respondents were however pessimistic on access to credit in the review month with an index of -12.2 points, which is a decline from the 7.2 point recorded in the preceding month. 3.3 Employment and Expansion Plans February 2018 March 2018 33.4 25.0 The positive outlook in the volume of business activities (69.2 index points) and employment (27.9 index points) indicated a favourable outlook in the next month. The employment outlook index by sector showed that the services sector (33.4 points) indicates the highest prospects for creating jobs, followed by wholesale/retail trade (22.9 points), industrial (21.5 points) and construction (16.2 points) sectors (Fig. 6, Table 1). An analysis of businesses with expansion plans by sector in the next month showed that the services and construction sectors indicate greater disposition for expansion with indices of 34.8 and 14.3 points respectively (Fig. 7, Table 1). 20.9 21.5 22.9 22.8 19.0 16.2 Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector Fig. 6: Employment Outlook Index on Own Operations by Sector 34.8 14.3 -4.5 Industrial Sector 0.0 Construction Sector Wholesale and Retail Trade Fig. 7: Businesses with Expansion Plans 4 Services Sector
  6. 3 .4 Business Constraints Insufficient Power Supply 70.7 Unfavourable Economic Climate The surveyed firms identified insufficient power supply (70.7 points), high interest rate (61.0 points), unfavourable economic climate (53.8 points), unclear economic laws (52.7 points), financial problems (50.5), insufficient demand (48.1 points), and unfavourable political climate (43.7 points) as the major factors constraining business activity in the current month (Fig. 8, Table 1). 53.8 Unfavourable Political Climate 43.7 Lack of Materials Input 27.8 Labor Problems 12.8 Competition 41.4 Financial Problems 50.5 Access to Credit 42.6 Insufficient Demand 48.1 Lack of Equipment 32.3 Unclear Economic Laws 52.7 High Interest Rate 61.0 0 20 40 60 80 Fig. 8: Business Constraints 3.5 Expectations on Exchange Rate Majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 26.7 and 40.8 points, respectively (Fig. 9, Table 1). 3.6 Expectations on Inflation and Borrowing Rates Respondent firms expect inflation rate to fall in both the current and next months, with confidence indices of -13.4 and -15.8 points for the current and next months, respectively (Fig. 9). Similarly, respondent firms expect borrowing rates to rise in the current month but fall in the next month, as the confidence indices stood at 2.6 and -4.2 points, respectively (Fig. 9, Table 1). Current Month Next Month 50 40.8 40 30 26.7 20 10 2.6 -13.4 0 N/$ Exchange Rate -15.8 Inflation Rate -4.2 Borrowing Rate -10 -20 Fig. 9: Business Expectation Index on Selected Economic Indicators 5
  7. ANNEX : TABLES TABLE 1 BUSINESS EXPECTATIONS SURVEY DATA Year Month 1. Overall Business Outlook on the Macroeconomy Confidence Index: All Sectors Current Month Next Month 2. Business Outlook Index on the Macroeconomy by Sector: Current Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector of which: Financial Intermediation Hotels and Restaurants Renting and Business Activities Community and Social Services 3. Business Outlook Index on the Macroeconomy by Sector: Next Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector of which: Financial Intermediation Hotels and Restaurants Renting and Business Activities Community and Social Services 4. Business Confidence Index on Own Operations by Sector: Current Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 5. Business Outlook Index on Own Operations : Current Month Volume of Business Activity Index Volume of Total Order Book Index Credit Access Index Financial Condition Index Average Capacity Utilization 6. Business Outlook Index on Own Operations : Next Month Volume of Business Activity Index Employment Outlook Index 7. Employment Outlook Index on Own Operations by Sector: Next Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 8. Business with Expansion Plans (in per cent): Next Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector of which: Financial Intermediation Hotels and Restaurants Renting and Business Activities Community and Social Services 6 2018 Feb Mar 14.5 57.8 24.5 64.1 16.3 4.8 0.0 15.5 19.4 9.5 17.2 15.4 23.4 29.7 20.0 25.0 42.9 17.9 24.8 19.3 52.0 57.1 31.3 65.0 52.8 69.0 73.0 59.0 52.1 78.4 68.6 69.0 71.4 69.1 77.5 55.7 6.1 -9.5 -6.3 3.9 6.8 8.1 20.0 6.1 7.1 2.2 -7.2 3.8 8.3 13.3 16.0 -12.2 7.6 16.5 67.0 21.9 69.2 27.9 20.9 19.0 25.0 22.8 21.5 16.2 22.9 33.4 -2.9 -6.7 28.6 40.0 48.4 -13.0 53.8 55.6 -4.5 14.3 0.0 34.8 64.4 -7.0 45.7 27.9
  8. TABLE 1 (Continued) BUSINESS EXPECTATIONS SURVEY DATA Year Month 9. Business Constraints: Current Month High Interest Rate Unclear Economic Laws Lack of Equipment Insufficient Demand Access to Credit Financial Problems Competition Labor Problems Lack of Materials Input Unfavourable Political Climate Unfavourable Economic Climate Insufficient Power Supply 10. Business Expectation Index on Selected Economic Indicators: Current Month N/$ Exchange Rate Inflation Rate Borrowing Rate 11. Business Expectation Index on Selected Economic Indicators: Next Month N/$ Exchange Rate Inflation Rate Borrowing Rate 12. Business Outlook index on the Macroeconomy by Type of Business: Current Month Importer Exporter Both Importer and Exporter Neither Importer nor exporter 13. Business Outlook index on the Macroeconomy by Type of Business: Next Month Importer Exporter Both Importer and Exporter Neither Importer nor exporter 14. Business Outlook index on the Macroeconomy by Size of Business: Current Month Small (<50) Medium (50 and <200) Large (200 and Up) 15. Business Outlook index on the Macroeconomy by Size of Business: Next Month Small (<50) Medium (50 and <200) Large (200 and Up) 16. Percentage Distribution of Respondent Firms by Type of Business Importer Exporter Both Importer and Exporter Neither Importer nor exporter 17. Percentage Distribution of Respondent Firms by Employment Size Small (<50) Medium (50 and <200) Large (200 and Up) No Response 7 2018 Feb Mar 65.2 49.6 30.3 45.3 43.4 47.9 45.0 7.6 22.5 45.2 57.0 72.0 61.0 52.7 32.3 48.1 42.6 50.5 41.4 12.8 27.8 43.7 53.8 70.7 19.9 -8.0 4.5 26.7 -13.4 2.6 33.1 -15.2 -11.2 40.8 -15.8 -4.2 15.6 50.0 21.8 10.4 17.7 23.5 29.1 25.9 48.1 70.0 50.9 62.2 58.9 70.6 62.8 65.7 -3.9 14.1 27.9 13.5 26.8 38.3 54.5 62.5 52.7 62.0 64.1 67.7 21.1 2.7 15.1 61.1 20.8 2.9 14.5 61.8 21.0 48.4 30.6 0.0 38.6 39.1 22.4 0.0
  9. TABLE 1 (Continued) BUSINESS EXPECTATIONS SURVEY DATA Year Month 18. Distribution of Respondent Firms by Sector Sample Size (N) Response Rate(%) All Sectors Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector of which: Financial Intermediation Hotels and Restaurants Renting and Business Activities Community and Social Services 19. Business Outlook Index on the Macroeconomy by Sector Contribution: Current Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 20. Business Outlook Index on the Macroeconomy by Sector Contribution: Next Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 21. Business Confidence Index on Own Operations by Sector: Current Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 22. Employment Outlook Index on Own Operations by Sector: Next Month Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector Employment Outlook Index 23. Drivers of macroeconomic Outlook by type of business: Current Month Importer Exporter Both Importer and Exporter Neither Importer nor exporter Macroeconomic Outlook Index 24. Drivers of macroeconomic Outlook by type of business: Next Month Importer Exporter Both Importer and Exporter Neither Importer nor exporter Macroeconomic Outlook Index: Next Month 25. Drivers of macroeconomic Outlook by Size of Business: Current Month Small (<50) Medium (50 and <200) Large (200 and Up) Macroeconomic Outlook Index: Current Month 26. Percentage Distribution of Respondent Firms by Sector Industrial Sector Construction Sector Wholesale and Retail Trade Services Sector 8 2018 Feb Mar 497 73.6 366 148 21 16 181 36 42 64 39 650 91.8 597 192 37 35 333 56 68 121 88 6.6 0.3 0.0 7.7 7.5 1.8 1.2 13.9 14.5 24.5 21.0 3.3 1.4 32.1 16.8 4.9 4.0 38.5 57.8 64.1 2.5 -0.5 -0.3 1.9 2.2 0.5 1.2 3.4 3.6 7.2 8.5 1.1 1.1 11.3 21.9 6.9 1.0 1.3 18.6 27.9 3.3 1.4 3.3 6.3 14.3 3.7 0.7 4.2 16.0 24.6 10.1 1.9 7.7 38.0 57.7 12.3 2.0 9.1 40.6 64.0 -0.8 6.8 8.5 14.6 5.2 10.5 8.6 24.3 40.4 5.7 4.4 49.5 32.2 6.2 5.9 55.8