Upward trend in business confidence

Small and medium-sized enterprises (SMEs) are regarded as growth engines for developing economies. However, for Nigeria, a large proportion are unrecorded since most SMEs fall within the country’s informal sector. Industry sources suggest that SMEs account for about half of Nigeria’s GDP. Business confidence dwindled due to the macro challenges over the past two years, stifling growth for SMEs. However, in light of Nigeria’s exit from recession, there is now a more stable macroeconomic outlook and, by extension an uptick in business confidence.

The CBN’s Q4 2017 survey on business expectations was released recently; it captured views from 1,950 business enterprises nationwide (95% of which were SMEs).

The survey showed the business confidence index for Q4 2017 at 17.7 points (indicating respondents’ overall optimism on the macro economy), compared with -29.0 points in the corresponding period of 2016.

Additionally, the survey revealed that the average capacity utilisation index stood at 3.4 points in Q4 2017, compared with -8.6 points in Q4 2016. The key drivers for this relatively positive reading were identified as increased business activity as well as improved internal liquidity positions for firms within the survey.

Upward trend in business confidence - FBNQuest Research

Insufficient power supplies were cited as the major constraining factor on business activities. Other factors were financial related. However, respondents expect inflation and borrowing rates to decline in 2018.

For business confidence to maintain this upward trend, consumption trends have to rise. However, structural issues also need to be addressed. We applaud the authorities for their continuing efforts in improving the country’s business environment.

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