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Economy

CBN’s survey shows rise in economic optimism

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Firms had positive outlook on volume of total order, business activity, financial conditions

The Central Bank of Nigeria (CBN) has released its Business Expectations Survey (BES) report for the month of May, which shows respondent firms expressing optimism on the overall Confidence Index (CI) on the macro economy in the current month as well as in June 2019.

According to the report, which was posted in the apex bank’s website at the weekend, firms’ outlook on the volume of total order, business activity and financial conditions (working capital) were positive during the review period.

Specifically, the report stated: “At 29.7 index points, respondents expressed optimism on the overall Confidence Index (CI) on the macro economy in the month of May 2019.The business outlook for June 2019 showed greater confidence on the macro economy with 62.7 index points.”

It explained that: “The optimism on the macro economy in the current month was driven by the opinion of respondents from services (15.7 points), industrial (9.7 points), wholesale/retail trade (2.8 points) and construction (1.4 points) sectors. The major drivers of the optimism for next month were services (36.6 points), industrial (18.7 points), wholesale/retail trade (4.9 points) and construction (2.5 points) sectors.”

Furthermore, the report stated that the positive outlook by type of business in May 2019 was propelled by businesses that are neither import-nor export-oriented (20.8 points), both import-and export-oriented (5.3 points), import-oriented (3.0 points), and those that are export-related (0.7 points).

On firms’ business confidence on their own operations, the report stated that all sectors also expressed optimism on their activities in the review month.

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“Respondents from the services sector expressed the greatest optimism on own operation with an index of 8.7 points, followed by the industrial sector with 3.0 points, the wholesale/retail trade with 0.8 points and the construction sector with 0.1 points,respectively,” the report showed.

Similarly, on financial conditions and access to credit, the report indicates that respondent firms’ outlook on the volume of total order and business activity in May 2019 remained positive, as both the indices stood at 15.0points.

In the same vein, respondents, according to the report, were optimistic in their outlook on financial conditions (working capital) and average capacity utilization as the indices stood at 12.5 and 16.8 index points, respectively.

Likewise, firms which responded to questions on their employment and expansion plans, said they expected a favourable business environment next month.

As the report put it: “The employment outlook index by sector showed that the wholesale/retail trade sector indicates higher employment expansion plans with an index of (25.9 points) followed by services sector (25.7 points),industrial sector (24.9points)and construction sector (5.9 points).”

Also, on expectations on exchange rate, the report also showed that majority of the respondent firms expect the naira to appreciate in the: “current month, next month and next twelve months as their confidence indices stood at 28.5, 40.1and 50.1index points, respectively.

Equally, most of the respondent firms, the report shows, expect the level of inflation to moderate in both the next six months and the next twelve months, even as they also expect borrowing rates to rise in the current month, next month and next twelve months.

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However, the report showed that respondents expressed pessimism on access to credit in the review month with an index of-1.9 points.

In addition, despite expressing optimism on the economy, the firms, according to the report, identified: “insufficient power supply, high interest rate, unfavourable economic climate, financial problems and unclear economic laws as major factors constraining business activity in May 2019.”

Source: By Tony Chukwunyem

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