Nigerian businesses expect borrowing rates to rise next month and the next twelve months, as the confidence indices stood at 5.1 and 6.3 points, respectively. The rate for the current month stood at 7.5 points.
Lenders reported increased demand for corporate credit from all firm sizes in Q3 2019. They also expect increased demand from all firm sizes in the next quarter, according to the credit condition survey report of the Central Bank of Nigeria (CBN) for the third quarter 2019.
In the report, Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to Monetary Policy Rate (MPR) widened in Q3 2019, but was expected to remain unchanged in the next quarter.
The overall spreads on unsecured lending widened in Q3 2019 and were expected to widen in the next quarter.
The availability of secured credit to households increased in Q3 2019 and was expected to increase in the next quarter. Improved market share was the major factor for the increase in secured credit.
The CBN had directed all deposit money banks to maintain a minimum LDR of 60 percent by September 30, 2019 and subsequently increased it to 65 percent with December 2019 as the new deadline.
On Friday, the CBN released the October 2019 Business Expectations Survey (BES), which was conducted from October 07-11, 2019 with a sample size of 1050 businesses nationwide.
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A response rate of 97.1 per cent was achieved, and the sample covered the services, industrial, wholesale/retail trade, and construction sectors.
The respondent firms were made up of small, medium and large corporations covering both import- and export-oriented businesses.
Respondents’ outlook on the volume of total order and business activity in October 2019 remained positive, as their indices stood at 15.7 and 16.2 points, respectively.
Similarly, respondents were optimistic in their outlook on financial conditions (working capital) and average capacity utilization, as the indices stood at 11.6 and 18.7 index points, respectively.
Respondents expressed optimism on access to credit in the review month, with an index of 1.7 points. At 27.3 index points, the overall confidence index (CI) indicated respondents’ optimism on the overall macro economy in the month of October 2019. The business outlook for November 2019 showed greater confidence on the macro economy, with 59.6 index points.
The optimism on the macro economy in the current month was driven by the opinion of respondents from services (15.1 points), industrial (9.1 points), wholesale/retail trade (2.5 points) and construction (0.5 points) sectors. Similarly, the major drivers of the optimism for next month were services (32.4 points), industrial (19.9 points), wholesale/retail trade (5.5 points) and construction (1.9 points) sectors.
Further analysis showed that businesses that are neither import- nor export-oriented (18.2points), import-oriented (4.6 points), both import- and export-oriented (3.3 points), and those that are export-related (1.0 point) drove the positive business outlook in October 2019.
However, Respondent firms identified insufficient power supply (67.3 points), high interest rate (57.6 points), unfavourable economic climate (55.9 points), financial problems (54.9 points), unclear economic laws (52.1 points), unfavourable political climate (49.1points), insufficient demand (46.5 points), competition (45.3 points) and access to credit (43.9 points), respectively, as major factors constraining business activity in the current month.
On exchange rate expectations, respondent firms expect the naira to appreciate in the current month, next month and next twelve months, as their confidence indices stood at 23.8, 36.7 and 49.5 index points, respectively.
