Businesses expect naira appreciation in August —CBN survey
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).