The BCI fell from 24 per cent to 17 per cent.
A survey by the Lagos Chamber of Commerce and Industry (LCCI) has revealed that Nigeria’s business confidence index (BCI) has declined as the optimism of business owners and operators in doing business in the country took a plunge in the fourth quarter of 2013.
The LCCI said in its quarterly report that the index, a leading economic indicator designed to measure the degree of optimism by business leaders on the state of the country’s economy through their investment and spending activities, fell to 17 per cent from the 24 per cent posted in the third quarter.
The index had improved steadily over the first three quarters of the year, growing from 10.5 per cent in the first, 16.5 per cent in the second, and 24 per cent in the third, before moderating to aggregate 17.6 per cent in the fourth quarter of 2013.
A decline in business confidence is often a pointer to slowing economic activities, as a result of the reduction in fresh investment decisions by business owners, the Chamber said; adding that the more confident entrepreneurs and managers feel about the business environment, the more likely they are to make new investments, create jobs and impact the economy.
“The moderation of the BCI score at this time suggests that business leaders are likely going to be softer towards expanding their investments in Nigeria in the months to come,” the LCCI said.
The LCCI identified factors likely to account for the decline to include poor access to credit, challenging security situation, dwindling public power supply and the increasing spate of non-performing trade credit.
The on-going systemic challenge in the Discount Houses businesses, the prolonged Petroleum Industry Bill (PIB) and the newly introduced 50 per cent Cash Reserved Ratio (CRR) on public sector deposits by Central Bank may have initiated some level of uncertainty in the Nigeria’s most organized and profitable sectors – finance and oil & gas.
Manufacturing sector least optimistic
The survey showed that all the sectors of the economy, except manufacturing, reported positive indices of optimism, though with weak business confidence levels.
“We are mostly worried by the negative (-2%) confidence level reported by operators in the manufacturing sector at this time,” the chamber said. “Over the last one year, the manufacturing sector has consistently remained at the bottom of BCI league table by trending between negative and neutral confidence levels.”
“The most disturbing factors for manufacturers include the influx of imported and substandard products, poor access to credit, high cost of doing business and inhibitive activities of government regulatory/monitoring agencies,” the LCCI revealed.
On the other hand, the agricultural sector remained impressive at 19 per cent, from the adverse business confidence it posted in the first quarter, which the LCCI said suggested that operators in the sector were hopeful of better days ahead to expand and embark on new investments, while their counterparts in the manufacturing sector would potentially remain held down by the lingering challenges confronting the country’s business environment.
The report noted that the finance sector recorded the largest decline, dropping 20 points from 35 per cent in the third quarter to 15 per cent in the fourth quarter, a development the LCCI noted was quite significant and a call for concern, considering that it reported record profit and impressive performance recently.
Impact of the newly introduced 50 per cent Cash Reserved Ratio (CRR) on public sector deposits by the Central Bank of Nigeria (CBN) and the on-going systemic challenge of the Discount House businesses may partly explain the uncertainty currently brewing in the Nigerian financial, the report said.
Business confidence in the north flat
Similarly, the survey said confidence level of businesses located in the South-Western part of the country also fell from the 44 per cent and 38 per cent reported in third and second quarters respectively to 28 per cent in the fourth quarter, following the trend exhibited by companies operating in the South-East and South-South with BCI scores of 19 per cent, 11 per cent and 21 per cent respectively.
The confidence level of businesses located in the Northern part of the country remained flat at zero. The survey however noted the initial gain that came with the Federal Government’s special security intervention, which saw BCI score of the North Central region jump to 11 per cent in the third quarter.
The 4th quarter 2013 BCI survey covered 15 sectors, with 412 top business executives as respondents over the period, 15th August to 24th September 2013.
The Chamber said the participation of top private players across all the sectors and sub-sectors were secured in a responsible fashion.
“The development suggests that expansion and new investment in most sectors/regions of the Nigerian economy may be soft in the months to come,” the report noted.
“Notwithstanding, the final take-over of the nation’s power companies by the new private owners is a succour to our yearnings for improved power supply. We look to see how the end of year festivities, increase political activities and sustained tightening by the monetary authorities will impact business confidence in the first quarter 2014” the Chamber said.
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