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These were highlights of the Business Expectation Survey (BES) conducted by the Central Bank of Nigeria (CBN) last quarter. “Majority of the respondent firms expect the naira exchange rate to depreciate in the current and next quarters, as the confidence indices stood at –14.7 and –5.1 points, respectively.

Respondent firms expect inflation rate to rise in both the current and next quarters, as the confidence indices stood at 18.5 and 7.3 points, respectively. Respondent firms expect the borrowing rate to rise in both the current and next quarters as the confidence indices stood at 10.6 and 4.9 points, respectively”, the survey revealed.

The Business Expectations Survey (BES) is a quarterly survey of leading firms drawn from Business Establishment updated frames of Central Bank of Nigeria and the National Bureau of Statistics. The BES result provides advance indication of change in the overall business activity in the economy and in the various measures of activity of the companies’ own operations as well as selected economic indicators.

The survey for the first quarter of 2015 was conducted between February 2nd and 13th.  The survey indicated that, “Respondent firms were optimistic on the macro economy as the business condition in Nigeria was expected to improve in Q1 2015. The optimism was driven by the opinion of respondents from the services sector (7.2 points), followed by wholesale/retail trade (4.1 points) and industrial (1.6 points).

“Respondents’ optimism in the volume of total order and the internal liquidity position,  buoyed the volume of their business activities in the current quarter. Similarly, the positive outlook in access to credit by the majority of firms upped the financial condition of firms in the review quarter.

“The positive outlook in the volume of business activities of the firms implied improved prospects for employment in the next quarter. The sector with the highest prospect for employment is the services sector followed by wholesale/retail trade, industrial and construction.

“The respondent firms emphasized that insufficient power supply was the major factor constraining the business activity in Q1 2015. Other constraining factors are high interest rate, financial problems, com- petition, unfavourable economic climate and unfavourable political climate.”

 

Demand for loans rises amidst decline in supply

Meanwhile, Businesses and households have increased demand for loans while default rate improved. This was revealed by the Credit Conditions Survey (CCS)  conducted by the CBN last month.  The survey however revealed a decline in availability of loans to households.

The aim of the survey according to CBN is, “Understand trends and developments in credit conditions. This quarterly survey of bank lenders is an input to this work. Lenders were asked about trends and developments in credit conditions in the previous and next quarters. The survey covers secured and unsecured lending to households; and lending to non-financial corporations, small businesses and to non-bank financial firms.

The survey revealed that, “The availability of secured credit to households decreased in Q1, 2015 but was expected to increase in the next quarter. Changing liquidity positions remained a major factor behind the decrease; lenders further reported that tight wholesale funding conditions also made significant contributions.

“Lenders reported that the availability of unsecured credit to households increased in Q1, 2015 and it is expected to increase further in Q2, 2015. Lenders reported that changing cost/availability of funds, market share objectives and changing appetite for risk contributed to the increased availability of unsecured credit in Q1, 2015.

“The overall availability of credit to the corporate sector increased in Q1 2015 and was expected to increase further in Q2, 2015. The important factors contributing to increased credit availability were changing sector specific risks, changing economic outlook and market share objective.

“Demand for secured lending for house purchase and consumer loans increased in Q1 2015, and were expected to increase further in Q2, 2015. Despite lenders stance  in tightening the credit scoring criteria in the current quarter, the proportion of loan applications approved in Q1, 2015 increased.

“Demand for unsecured credit card lending and an overdraft/personal loan from households increased in the current quarter, and are expected to further increase in the next quarter. However, demand for unsecured credit card lending from small businesses was expected to decrease in Q1, 2015, while demand for overdraft/personal loans from small businesses was expected to further increase.  In spite of the tightening in the credit scoring criteria in total unsecured loan applications in Q1 2015, the proportion of approved households total loan applications improved in the current quarter.

“Lenders reported increased demand for corporate credit across all firm sizes in Q1, 2015. It is expected that credit demand would further increase for all businesses in the next quarter except for demand from OFCs. Following the narrow spread between bank rates (on small businesses and OFCs) and MPR, the proportion of loan applications approved for small businesses, medium and large PNFCs increased in Q1, 2015 and further increase is anticipated in the next quarter”.

 

 

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Businesses see higher interest rates, further fall in Naira value

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