Business Optimism Hits New Low in July Amid Rising Economic Concerns - CBN

Samuel Mobolaji

Business sentiment in Nigeria has taken a downturn, with optimism dipping sharply in July 2024, according to the latest Business Expectations Survey released by the Central Bank of Nigeria (CBN).

The survey revealed a growing sense of pessimism across most sectors of the economy, even as businesses project some improvement in the coming months.

The overall confidence index (CI) dropped to a meager 0.1 index points, highlighting the cautious optimism among the over 1,600 businesses surveyed.

This figure marks a significant decline of 3.0 index points compared to the previous month, indicating a wavering confidence in the macroeconomic environment. A CI above 0.0 suggests positive sentiment, while a CI below 0.0 reflects negative sentiment.

The Industrial, Agriculture, and Services sectors showed mixed results with indices of -1.0, 1.0, and -0.3 points, respectively. Among the subsectors, Mining and Quarrying; Electricity, Gas & Water Supply, and Market Services posted positive indices of 17.6 and 0.9 points, showing some resilience. In contrast, the Construction, Non-Market, and Manufacturing sectors recorded deeper pessimism with indices of -5.6, -3.4, and -1.5 points, respectively.

When focusing on their own operations, respondents expressed a lack of confidence, reflecting widespread pessimism across all sectors. The Construction sector led the decline with a confidence index of -33.3, followed by Mining & Quarrying at -29.4, and Electricity, Gas & Water Supply at -14.9. Non-Market Services, Manufacturing, Market Services, and Agriculture sectors also recorded negative confidence indices of -12.6, -11.1, and -8.1, respectively.

Despite the overall pessimism, the outlook for August 2024 remains hopeful, with optimism expressed in the Volume of Business Activities and Employment Outlook indices at 14.4 and 8.1 points, respectively. These figures suggest potential employment growth and economic stability in the near term, providing a glimmer of hope for job creation across various sectors.

The Agriculture sector emerged as a beacon of optimism, driving the positive business outlook for July 2024. Respondents anticipate improvements in business conditions and employment prospects over the next month, three months, and six months. The Agriculture sector is expected to lead employment growth, followed by the Industry and Services sectors.

However, the survey also highlighted significant challenges facing businesses. Insecurity was cited as the primary constraint on business activity in July 2024, followed by high interest rates, insufficient power supply, and the burden of high and multiple taxes.

Regarding future economic indicators, businesses expect the exchange rate to depreciate in most review periods, except over the next six months. They also anticipate borrowing rates to rise across all periods surveyed. Additionally, respondents expressed concerns over the current inflation rate of 34.19 per cent, viewing it as excessively high.

Overall, while some sectors remain hopeful, the prevailing sentiment across Nigeria’s business landscape is one of caution and concern, underscoring the need for strategic measures to restore confidence and drive economic growth.