The Business Expectation Survey

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December 20, 2024/CSL Research

The November 2024 Business Expectation Survey (BES), conducted from November 11 to 15, surveyed 1,900 businesses across Nigeria and achieved an impressive 99.7% response rate. This collaborative effort by the Central Bank of Nigeria and the National Bureau of Statistics provides valuable insights into anticipated changes in overall business activity. While the survey highlights general optimism about the macroeconomic outlook, a closer examination reveals a more nuanced landscape. A key positive finding was the increased overall average capacity utilization, rising to 53% in November from 51% in October.

Despite the improvement in capacity utilization, businesses expressed concerns over several key
indicators, including the volume of business activities, financial conditions, access to credit, and volume of total orders. These concerns underscore the mixed outlook captured by the survey.

The agricultural sector displayed the highest level of optimism, with an expansion index of 64.0 for December 2024, reflecting robust growth expectations. This aligns with a broader trend of optimism among all major sectors regarding the macroeconomy. Businesses anticipate a favourable volume of business activities in December 2024, as well as in February and May 2025. Correspondingly, all sectors reported positive expectations for employment and expansion, with plans to increase hiring in December 2024.

Regarding exchange rate expectations, businesses anticipate short-term depreciation of the Naira. However, a reversal is expected in the longer term, with businesses projecting Naira appreciation in the next six months, indicated by a positive index of 1.3. Despite optimistic projections, businesses face several significant operational challenges. Insufficient power supply emerged as the most pressing issue, cited by 77.6% of respondents. Other major concerns included high interest rates (71.4%), insecurity (70.3%), multiple taxes (72.2%), and an unfavourable economic climate (70.4%).

The November 2024 BES reveals a complex interplay of positive and negative factors shaping the Nigerian business landscape. Businesses are utilizing existing capacity more effectively and anticipate future growth, including a stronger Naira in the medium term. However, concerns about financial conditions and significant operational challenges, such as power supply and high interest rates, remain prevalent. Addressing these obstacles will be critical to sustaining the optimism and realizing the growth potential highlighted by the survey. Several targeted actions can be taken by policymakers, businesses, and other stakeholders to improve power supply, mitigate high interest rate, streamline taxation, reduce inflation and stabilize the currency, thereby improving the economic environment for businesses.

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