Businesses expect naira appreciation in August —CBN survey

CBN

Central Bank of NigeriaTHE monthly business expectations survey report released on Friday by the statistics department of the Central Bank of Nigeria ( CBN), has shown that majority of firms expect the naira to appreciate this Month of August 2018.

This is evident in the confidence indices which stood at 27.3 and 44.8 points, respectively.

Available records show that at  the  parallel  market,  the  naira  opened  the month of July at N362/$, appreciated to a 2-year high of   N360/$  on  July  4th,  before  closing  at N361/$  on  July  13th.  This  can  be  attributed partly  to  the  CBN’s  intervention  of   approximately $420 million in the period.

At the Investors and Exporters Foreign Exchange (IEFX) window  the  naira  traded  between  N361.16/$  and N362.58/$  in  the  review  period.  Total  forex traded at the IEFX window in the first half  of  July  was  $1.72bn,  compared  to  $2.29billion  in  the previous month.

On Inflation and Borrowing Rates, respondent firms expect inflation rate to fall in both the current and next months, with confidence indices of -6.9 and -15.0 points for July and August respectively.

However, they expect borrowing rates to rise in July but decline in August 2018, as the confidence indices stood at 5.6 and -0.9 points, respectively. The July 2018 Business Expectations Survey (BES), was carried out during the period July 12-20, 2018 with a sample size of 1050 businesses nationwide.

According to CBN, response rate of 94.7 per cent was achieved, and the sample covered the services, industry, wholesale/retail trade and construction sectors.

The firms were made up of  small, medium and large organisations covering both import- and export-oriented businesses.

Other highlights of the outcome of the survey are as follows’: outlook on the volume of total order and business activity in July 2018 was less optimistic, as the index stood at 4.6 and 3.5 points, respectively when compared to 16.4 and 16.1 points, respectivly recorded in the previous month.

Similarly, respondents’ outlook on financial conditions (working capital) and average capacity utilization declined, as the indices stood at 2.2 and 10.0 index points, respectively when compared with the 11.7 and 23.4 points, respectively recorded in June 2018.

“Respondent firms expressed less optimism on the macro economy in July 2018 when compared with the level recorded in the preceding month.

“Respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) remained positive during the review period.

“Firms identified insufficient power supply, high interest rate, unfavourable economic climate, financial problems, unclear economic laws, insufficient demand and unfavourable political climate as the major factors constraining business activity in the current month,” the report read in part.

At 13.6 index points, respondents’ overall confidence index (CI) on the macro economy in July 2018 declined when compared with the level of 34.7 index points recorded in June 2018. The  businesses outlook for August 2018 showed more confidence on the macro economy at 58.7 index points.

The optimism on the macro economy in July was driven by the opinion of respondents from services (9.3 points), industrial (3.6 points), construction (0.4 points), and wholesale/retail trade (0.3 points), sectors, while the drivers of the optimism for August were services (34.8 points), industrial (16.5 points), wholesale/retail trade (4.6 points), construction (2.8 points) sectors.

Furthermore, the positive outlook by type of business in July 2018 was driven by businesses that are neither import- nor export-oriented (7.8 points); import-oriented (2.5 points), both import- and export-oriented (2.5 points), and those that are export-related (0.7 points).

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