A Central Bank of Nigeria (CBN) survey has shown that the confidence of private sector operators on the macro economy stood at 64.9 index points in July, 2018. This represents a 30.2 percentage point growth when compared to 34.7 index points recorded in June. According to the survey titled, “Business Expectations Survey (BES) for June, 2018”, “The businesses outlook for July 2018 shows a greater confidence on the macro economy at 64.9 index points.”
The survey covers the opinion of respondents from services (20.5points), industrial (9.3points) construction (2.6 points) and wholesale/retail trade sectors (2.3 points), while the drivers of the optimism for next month were services (37.8 points), industrial (19.5points), wholesale/retail trade (3.9points) and construction (3.7points) sectors. The survey report stated: “At 34.7 index points, respondents’ overall confidence index (CI) on the macro economy in June 2018 improved when compared with the level of 28.9index points recorded in May2018.
“Furthermore, the positive outlook by type of business in June 2018 was driven by businesses that are neither import nor export oriented (22.6points), import-oriented (6.0points) both import and export-oriented (5.8points), and those that are export-related (0.5 points). “Majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 29.5 and 44.6points, respectively.
“Respondent firms expect inflation rate to fall in both the current and next month. “Similarly, respondent firms expect borrowing rates to rise in both the current and next months, as the confidence indices stood at 1.6and 3.1points, respectively” The surveyed firms identified insufficient power supply (63.6 points),high interest rate (59.9 points),unfavourable economic climate (52.7 points),financial problems (50.4 points),unclear economic laws(49.5 points),insufficient demand (47.9 points) and unfavourable political climate (46.0 points) as major factors constraining business activity in the current month.
Attitude to inflation
On the other hand, the CBN’s Inflation Attitudes Survey Report for second quarter of 2018 showed that Nigerians prefer higher interest rates on borrowings to higher inflation when confronted with a choice between high interest rate and high inflation. Respondents were asked to choose between raising interest rates in order to keep inflation down, and keeping interest rates down to allow prices to rise.
According to the survey report 26.3% preferred interest rates to rise in order to keep inflation down compared to 28.0% who said they would prefer prices to rise faster, while 45.6% had no idea. It concluded: “These responses suggest that given a trade-off, more of the respondents would prefer higher interest rates to higher inflation which is suggestive of the respondent households’ support for the Bank’s price stability objective.”