Business confidence in the economy dropped to 28.3 index points in January 2020. This represents a decline of 2.0 index points when compared to 30.3 index points in December 2019.
The Central Bank of Nigeria (CBN) disclosed this over the weekend in its Business Expectation Survey (BES) Report.
The Business Confidence Index is a leading indicator of future development in the country.
The business outlook for this month however showed greater confidence in the economy with 61.4 index points. The report stated: “At 28.3 index points, the overall confidence index (CI) indicated respondents’ optimism on the overall macro-economy in the month of January 2020. The business outlook for February 2020 showed greater confidence in the economy, with 61.4 index points.
“The optimism on the macro-economy in the current month was driven by the opinion of respondents from services (16.1 points), industrial (9.0 points), wholesale/retail trade (2.6 points) and construction (0.5 points) sectors.
“Similarly, the major drivers of the optimism for next month were services (35.1 points), industrial (20.0 points), wholesale/retail trade (4.5 points) and construction (1.8 points) sectors.
“Further analysis showed that businesses that are neither import-oriented nor export-oriented (19.1 points), both import-oriented and export-oriented (4.6 points) import-oriented (4.1 points), and those that are export-related (0.6 point) drove the positive business outlook in January 2020.”
On business confidence on own operations by sector, the report said: “All sectors expressed optimism on own operations in the review month. Respondents from the services sector expressed the greatest optimism on own operations, with an index of 8.1 points, followed by the industrial sector with 4.6 points, the wholesale/retail trade with 1.7 points, while the construction sector had 0.3 point.
However, respondent firms identified insufficient power supply (66.2 points), high interest rate (57.1 points), unfavourable economic climate (54.6 points), financial problems (52.8 points), unclear economic laws (51.9 points), unfavourable political climate (46.3 points), competition (45.3 points) and insufficient demand (44.2 points) as major factors constraining business activity in the current month.
The report further noted that business owners expect improvement in economic conditions throughout the year. “Respondents anticipate improvements in economic conditions, as the index on economic growth rate in the short run stood at 34.5, 45.1 and 55.6 points for the current month, next six months and next twelve months, respectively.”