CBN Report Says Naira to Appreciate Further, Inflation to Rise

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CBN Report Says Naira to Appreciate Further, Inflation to Rise

The Central Bank of Nigeria (CBN’s) Business Expectations Survey of February shows businesses are hopeful the naira will appreciate against the dollar this month.

Currently, the naira exchanges for N357/$1.

According to the CBN report released last week, the February 2019 Business Expectations Survey (BES) was carried out during the period February 11-15, 2019 with a sample size of 1050 businesses nationwide.

A response rate of 97.4 percent was achieved, and the sample covered the services, industrial, wholesale/retail trade, and construction sectors.

Highlights of the report show that respondent firms expect the Naira to appreciate in the current month (February 2019) and next months.

The respondents also project that inflation will rise in both  next six months and the next twelve months even as borrowing rates will rise in March 2019 and the next twelve months.

Furthermore, respondent firms expressed optimism on the macro economy in February 2019. Respondents’ outlook on the volume of total order, business activity and financial conditions (working capital) were positive during the review period.

Firms identified insufficient power supply, high interest rate, unfavourable economic climate, financial problems, unfavourable political climate, unclear economic laws, insufficient demand and access to credit as major factors constraining business activity.

The respondent firms were made up of small, medium and large corporations covering both import-and export-oriented businesses.

At 22.1 index points, respondents expressed optimism on the overall confidence index (CI) on the macro economy in February 2019.

The businesses outlook for March 2019 showed greater confidence on the macro economy with 58.5 index points.

The report suggested that the optimism on the macro economy in the current month was driven by the opinion of respondents from services (12.9points), industrial (7.3points), wholesale/retail trade (1.0points) and construction sectors (0.8points).

It said the major drivers of the optimism for March were services (33.4points), industrial (17.7points), wholesale/retail trade (5.3points) and construction sectors (2.1points).

According to the report, the positive outlook by type of business in February 2019 were driven by businesses that are neither import-nor export-oriented (14.3points),import-oriented (4.0 points),both import-and export-oriented (3.2points), and those that are export-related (0.6points).

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