- Nigerian firms optimistic business conditions will improve – Report
The local bourse pulled back slightly on Wednesday after Tuesday’s rally, bringing the benchmark Index down by 7bps to close at 95,831.51 points.
Tier-1 banks, GTCO (-0.66%), FBNH (-1.21%) and UBA (-1.79%) were the major drivers of the market’s weak performance, despite gains in TRANSCOHOT (+2.09%), ACCESSCORP (+0.26%) and WAPCO (+1.08%).
Consequently, the year-to-date return fell to 28.16 percent, with the market capitalisation gaining ₦599.43billion to close at ₦55.05trillion.
A breakdown of the analysis of Wednesday’s market activities showed trade turnover settled lower relative to the previous session.
While the value of transactions lost 5.66 percent, a total of 360.56million shares (down from 1.01bn in the previous session) valued at ₦7.25bn were exchanged in 8,813 deals. OANDO (-8.66%) led the volume and value charts with 66.23million units traded in deals worth ₦2.69billion.
Market breadth closed positive at a 1.39-to-1 ratio with advancing issues outnumbering the declining ones. IKEJAHOTEL (+10.00%) topped twenty-four (24) others on the leader’s table while UPL (-9.40%) led seventeen (17) others on the laggard’s log.
In the money market, banks experienced excess liquidity following today’s T-bills maturity, which prompted an uptick in the use of the Standing Deposit Facility. Consequently, NIBOR rates declined across all maturities. Additionally, key money market rates such as the Open Repo Rate (OPR) and Overnight Rate (O/N) decreased by 764bps and 776bps to conclude at 26.05 percent and 26.60 percent, respectively.
The Nigerian Interbank Treasury Bills True Yield (NITTY) declined across maturities as investor sentiment weakened following today’s NTB auction. This shift in sentiment led to bearish momentum in the secondary market for Nigerian Treasury Bills, pushing the average yield up by 0.69 percent to 20.32 percent.
Trading in the FGN bond market showed slight positive movement, with the average secondary market yield decreasing by 0.01 percent to 19.72 percent. In the Nigerian sovereign Eurobonds market, bullish sentiment across segments of the yield curve led to a decrease in the average yield by 0.03 percent to 10.10 percent.
At the official NAFEM market, the naira appreciated by 3.03 percent, closing at ₦1,543.84 per US dollar, while in the parallel market, the naira slipped by 0.63 percent, ending the day at ₦1,600 per dollar.
Nigerian firms optimistic business conditions will improve –Report
Over 1,600 Nigerian companies have expressed confidence that the business climate of the country will improve.
This was revealed in the July 2024 Business Expectations Survey carried out between the periods of July 15-19, 2024, carried out by the Central Bank of Nigeria.
Respondents were selected across Industry, Services and Agriculture sectors. Respondents’ outlook for the next month, next 3 months and next 6 months all indicated optimism.
According to the CBN, the positive outlook in the volume of business activities of the firms in the next month implied improved prospects for employment in the same period.
The sector with the highest prospect for employment is the Agriculture Sector, followed by the Industry and Services sectors.
Meanwhile, respondent firms opined that insecurity was the major factor constraining the business activity in July 2024. Other constraining factors are high interest rate, insufficient power supply, and high/multiple taxes.
Also, respondent firms expect the exchange rate to depreciate in all review periods except the next six months. However, they expect the borrowing rate to rise in all the periods under review. Respondents also opined that the current inflation rate of 34.19 is too high.
On prospects for business expansion and employment, respondent firms were optimistic on their plans to expand across all sectors in August 2024, with the Agriculture Sector demonstrating the highest prospect for expansion at 66.9 percent in the next month.
Similarly, Construction, Market Services, Non-Market Services, Manufacturing, and Mining & Quarrying firms indicated interest in expanding their businesses with 56.3, 55.2, 50.9, 44.3, and 30.0 points respectively. The positive confidence indicates anticipated growth in these sectors in the next month.
In line with the respondents firms’ interest in expanding their businesses, the employment outlook was also positive across all sectors in August 2024.
A breakdown of the employment outlook index by sector shows that at 14.5 points, the Agriculture Sector also has the highest prospect of creating jobs in the next month. This is followed by Construction (13.9 points), Mining and Quarrying (11.8 points) Manufacturing (6.0 points), Non-Market Services (5.8 points) and Market Services (4.4 points).
Respondent firms indicated various factors limiting their businesses in the current month, with Insecurity being the highest factor followed by High Interest Rate, Insufficient Power Supply, High/Multiple Taxes and Extortion and Corruption.
They expect the naira to depreciate in the current month, next month and next three months but appreciate in the next six months as their indices stood at -22.6 points, -16.5 points, -4.8 points and 13.7 points respectively. They expect the borrowing rate to rise as the confidence indices stood at 15.0, 14.3, 18.3 and 17.4 points, in all the review periods, respectively, (Fig. 13, Table 1, and Section 16 19).
At the same time, their perception of inflation indicated that they consider the current inflation rate of 34.19 too high. At 72.8 points, this sentiment was strongest amongst large firms.
