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CBN: Financial condition index hit 21% in Q2

By BusinessNews Staff on July 14, 2014

There are indications that access to credit by businesses across the major sectors of the economy improved to a great extent in the second quarter of the year as the Central Bank of Nigeria (CBN) put the financial condition index (FCI) at 21 per cent for the period.
The FCI is a composite guide of companies’ financial position (assets, liabilities and equities) at a specific point in time.

The index showed that the positive outlook in access to credit by the majority of firms surveyed upped the financial condition of firms in the review quarter.

The Business Expectations Survey (BES) is a quarterly survey of leading firms drawn from Business Establishment updated frames of CBN and the National Bureau of Statistics.
The BES result provides advance indication of change in the overall business activity in the economy and in the various measures of activity of the companies’ own operations as well as selected economic indicators.

According to the publication, the (FCI) in the current quarter stood at 21.0 per cent and was driven by sectors like the services (9.4 points), industrial (5.3 points), wholesale /retail trade (5.2 points), and construction sector (1.2 points).

It stated, “Respondents’ optimism in the volume of total order and the internal liquidity position, buoyed the volume of their business activities in the current quarter. Similarly, the positive outlook in access to credit by the majority of firms upped the financial condition of firms in the review quarter.”

The development is also set to impact positively on the job market as the report raised the prospect of increased employment activities going forward.

It said, “At 66.5 index points, the positive outlook in the volume of business activities implied higher prospect for employment in the next quarter, as the employment index stood at 38.6 points. The employment outlook index by sector shows that the services sector has higher prospect for creating jobs (13.9 per cent), followed by the industrial sector (10.5 per cent) wholesale/retail trade sector (9.7 per cent), and the construction sector (4.3 per cent).”

Equally, it raised optimism on employment generation. The CBN’s document said, “In the analysis of businesses with expansion plans by sector, the wholesale/retail sector indicated higher interest for expansion with an index of 69.3 points, in the next quarter. Similarly, services, industrial and construction firms indicated interest in expanding their businesses in Q2, 2014 with indices of 63.6, 62.9 and 57.1 points, respectively.”

The apex bank explained that the Q2, 2014 Business Expectations Survey (BES) was carried out between the periods of May 12-22, 2014 with a sample size of 1,850 business enterprises nationwide. A response rate of 98.7 per cent was achieved, and the sectors covered during the exercise included Industry, Construction, Wholesale/Retail Trade and Services.

The report showed that respondent firms were optimistic on the macro economy as the business condition in Nigeria was expected to improve in Q2 2014. The optimism was driven by the opinion of respondents from the services sector (9.4 points), followed by wholesale/retail trade (5.3 points), industrial (4.3 points) and construction (2.7 points).

“Respondents’ optimism in the volume of total order and the internal liquidity position buoyed the volume of their business activities in the current quarter. Similarly, the positive outlook in access to credit by the majority of firms upped the financial condition of firms in the review quarter,” the report stated.

It explained further that the positive outlook in the volume of business activities of the firms implied improved prospects for employment in the next quarter. The sector with the highest prospect for employment is the industrial, followed by services, wholesale/retail trade and construction.

“The respondent firms emphasised that insufficient power supply was the major factor constraining the business activity in Q2 2014. Other constraining factors are high interest rate, financial problems, unfavourable economic climate and competition. “
Respondent firms expect the naira exchange rate to remain strong in the current and next quarters. They also expect inflation and borrowing rates to rise in both the current and next quarters,” the report said.

THISDAY gathered that respondents were drawn from the industrial, construction, and wholesale/retail trade and services sectors made up of: Financial Intermediation, Hotels and restaurants, Renting and Business Activities and Community and Social Services.

The overall response rate for the quarter, at 98.7 per cent was 0. percentage point below the level attained in the previous quarter. A breakdown of the responses received by type of business showed that the “neither importer nor exporter” category of the respondents accounted for the highest of 73.6 per cent followed by the “importer” with 15.0 per cent. “Both Importer and Exporter” respondents accounted for 8.9 per cent, while 2.5 per cent represented the exporter” category.

[This Day]

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