Indications are fast emerging that job creation for the third quarter of 2016 may rise marginally on the back of the recent foreign exchange (FX) liberalisation.
Despite a fall in business activities and employment to 57.0 and 29.9 index points in the second quarter of 2016, from 61.2 and 36.0 respectively in the first quarter, Central Bank of Nigeria (CBN)’s Business Expectation Survey noted the high prospects for business volume and employment index in the third quarter.
The employment outlook index by sector, showed that the services sector (10.6 per cent) had higher prospects for creating jobs, followed by the wholesale/retail sector (8.0 per cent), industrial (6.4 percent) and construction (4.7 percent) sectors.
Analysts tie the expected surge in business activities and expansion plans to the recent foreign exchange liberalisation.
The naira fell 30 percent on Monday June 20, the first day it floated freely, shedding 0.5 percent of its value to settle at 284 against the dollar. The currency traded at N281.60 on the interbank market Thursday, June 23.
“This is reflected in the gains seen in the equity market. Alongside increased economic momentum, the hope will be that companies will soon start hiring again”, Razia Khan, managing director, Chief Economist, Africa Global Research, Standard Chartered Bank, London said in an emailed response to questions.
Khan however said it is important to recognise that unemployment tends to be a lagging indicator, in that it typically follows the business cycle.
“So we may have to see some months of economic recovery first, before anticipating any employment gains to be realised. But at least currency flexibility should mean that the trend towards falling employment might be arrested”, Khan said.
On the analysis of businesses with expansion plans by sector in the next quarter, the construction sector indicated higher disposition for expansion, with an index of 64.6 points.
Similarly, services, wholesale/retail trade, and industrial firms indicated expansion plans for Q2, 2016 with indices of 64.4, 64.2 and 56.0 points, respectively.
“The FX liberalisation will see a marginal increase in portfolio inflow, capital importation, diaspora remittances, and export proceeds,” said Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI) by phone.
“These will positively impact investments, which will invariably push up job creation.”
Meanwhile, the CBN has established a N500 billion Non-oil Export Stimulation Facility (ESF) and a N50 billion Export Re-discounting and Refinancing Facility (RRF) to address the impact of dwindling oil revenue and the need to urgently reposition the non-oil export sector.
Analysts agree that with the recent foreign exchange liberalisation by the CBN, sentiments around economic recovery have been buoyed.
“For jobs created to be sustained, there is need for infrastructural and institutional reforms,” said Bongo Adi, an economist at the Lagos Business School (LBS), in response to questions.
The quarter (Q2), 2016 Business Expectations Survey (BES) by the CBN revealed that at 2.4 points, the average capacity utilisation index (CUI) in Q2, 2016 dipped by 12.8 points when compared with the 15.2 points achieved a year earlier.
However, Nigerian firms identified insufficient power supply with 68.7 index points, financial problems (54.3 index points), unfavourable economic climate (51.0 index points), high interest rates (45.8 index points), access to credit (38.2 index points), unfavourable political climate (36.3 index points) and unclear economic laws (36.2 index points) as the major factors constraining business activity in the current quarter.
According to the survey the overall confidence index (CI), which stood at –12.3 points in Q2 2016, indicated respondent firms’ pessimism on the macro economy, however at 44.4 points, the overall CI points to greater confidence on the macro economy in the next quarter.
According to the report, BES was conducted during the period May 1st to 13th, 2016. A total of 1,950 firms were surveyed nationwide, drawn from the updated survey frames of both the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). The survey produced a response rate of 99.5 per cent in the quarter under review.
Respondents were drawn from the Industrial, Construction, Wholesale/Retail trade and Services sectors. The Services sector is made up of Financial Intermediation, Hotels and Restaurants, Renting & Business activities and Community & Social Services.
HOPE MOSES-ASHIKE, JOSEPHINE OKOJIE & LOLADE AKINMURELE
