Nigeria – confidence over future prospects improves

The Standard Chartered-MNI Business Sentiment Indicator (BSI) for Nigeria fell to 54.7 in January from 58.9 in December. The deterioration in sentiment was largely the result of declining demand now that the festive season is over. Our survey suggests that price pressures eased in January, with Nigerian businesses expecting further easing in the coming months. Access to credit continues to be a major concern for Nigerian businesses: the availability of credit indicator hit yet another series low following that set in December. While credit availability remains a major concern for a majority of Nigerian businesses, those able to secure loans reported a decline in the rate of interest paid.

Businesses, however, remain optimistic about the coming months  Inflationary pressures receded as demand softened Interest costs are falling despite a declining supply of credit. Four of the five indicators that make up the headline figure declined. Of these, new orders – which contributes the most to the headline indicator (35 percent) – registered the largest drop. The employment indicator, however, rose marginally. Headline sentiment is down 11.4 percent compared to a year ago.

In all, 10 of the 15 current conditions indicators deteriorated. Looking ahead, Nigerian businesses seem more optimistic about business activity in the coming months, as just six of the 15 future expectations indicators registered declines compared with 12 out of 15 the previous month; furthermore, just three future expectations indicators are below the 50 breakeven level. The increased optimism was also captured by the overall business conditions future expectations indicator which reached its highest level since July 2016.

With the festive season now over, Nigerian businesses reported weaker demand. New orders were down 14.6 percent on the month while export orders fell back into contractionary territory after rising for three consecutive months. Inventories have started to build up, with the current conditions indicator rising 14.4 percent m/m. In response, firms are cutting back production.      

The Standard Chartered MNI Business Sentiment Indicators provide unrivalled insight into business activity, and is expected to be a forerunner in economic analysis in each of the three countries. Companies of varying scale and sectors respond to a consistent set of survey questions covering themes such as orders, production, interest rate fluctuations, credit availability, employment and export trends.