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CBN: Financial condition index hit 21% in Q2

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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.

Credits: [This Day], and Business News.

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