CBN Report: Firms Expect Borrowing Costs To Rise In Oct
The Central Bank of Nigeria has said its recent survey revealed that firms, including small, medium and large organisations, expect borrowing rates to increase this month.
The CBN said the September 2018 Business Expectations Survey was carried out from September 10 to14, 2018 with a sample size of 1,050 businesses nationwide, covering the services, industry, wholesale/retail trade and construction sectors.
It said majority of the respondent firms expected the naira to appreciate in September and October as the confidence indices stood at 29.9 and 41.5 index points, respectively.
According to the report, respondent firms expected inflation rate to fall in September and October, with confidence indices of -4.7 and -13.9 points, respectively.
The CBN said, “Similarly, respondent firms expect borrowing rates to rise in both current month and next month as the confidence indices stood at 3.7 and 1.8 points, respectively.
“Respondents’ outlook on the volume of total order and business activity in September remained positive, as the index stood at 16.0 and 15.2 points, respectively when compared to 9.1 and 10.0 points, respectively recorded in the previous month.”
It said respondents’ outlook on financial conditions (working capital) and average capacity utilisation improved as the indices stood at 11.6 and 18.3 points, when compared with the 8.4 and 15.9 points, respectively recorded in August.
“Respondents were pessimistic about access to credit in the review month, with an index of -0.7 points,” the apex bank added.
According to the report, the surveyed firms identified insufficient power supply (65.9 points), high interest rate (54.9 points), unfavourable economic climate (53.6 points), financial problems (51.6 points), unclear economic laws (47.1 points), unfavourable political climate (46.9 points), insufficient demand (44.5 points) and access to credit (40.4 points) as the major factors constraining business activity in September.
The CBN said the positive outlook in the volume of business activities (70.4 points) and employment (24.4 points) indicated a favourable business outlook in October.
It said the employment outlook index by sector showed that the services sector (27.7 points) reported the highest prospects for creating jobs, followed by industrial (21.1 points), wholesale/retail trade (17.8 points), and construction sector (16.2 points).
The CBN said, “The analysis of business expansion plans by sector next month (October) showed that the services sector indicates greater disposition for expansion with an index of 24.0 points followed by construction and wholesale/retail trade sectors with 18.5 and 16.7 points, respectively.
“At 24.8 index points, respondents’ overall confidence index on the macro economy in September was more optimistic when compared with the level of 21.5 points recorded in August 2018. The business outlook for October showed more confidence on the macro economy at 64.5 points.”