The Nigerian Business Confidence Index, BCI, has dropped by 5.1 per cent to 14.3 per cent in the third quarter of the year from 19.4 per cent in the second quarter as top business executives continued to worry over the security situation, government policy changes and poor power supply among other challenges.
The Third Quarter 2014 BCI Survey released by the Lagos Chamber of Commerce, LCCI, at the weekend, reasoned that “The drop of the BCI scores at this time suggests that business leaders are largely pessimistic about expanding their investment over the next few months.”
The index however showed retained confidence in the manufacturing sector with a positive confidence rating of four per cent, the same level, which it recorded in the second quarter as against the minus 10 per cent confidence rating recorded in the first quarter.
“Interestingly, the manufacturing sector posted a positive confidence level of four per cent for the second time over the last seven quarters.
“This sector has consistently remained at the bottom of BCI league table by steadily recording negative confidence levels. Medium and small manufacturing enterprises are the most hit by the lingering challenges constraining productive activities in the country.
“The most disturbing factors for manufacturers include: power supply challenges, logistics challenges, the influx of imported and substandard products, preference for imported goods by Nigerians, poor access to credit, high cost of doing business, infrastructure shortcoming and inhibitive activities of government regulatory/monitoring agencies,” the LCCI said.
Agricultural sector topped the decline index with 16 per cent down eight per cent from 24 per cent in the second quarter, with the LCCI stating that the decline in the agricultural sector confidence levels are due to poor access to credit, infrastructure shortcomings, weak agricultural-industry linkages, transport and logistics constraints and concerns over the inclusiveness of Federal Government’s ongoing agricultural transformation initiative.
According to the chamber, which represents the largest collection of Nigerian business, “The optimism among players in the agricultural sector, which was relatively strong in 1st and 2nd quarter is beginning to moderate.
“This is a pointer that operators expectation in the agricultural sector is beginning to wane. The BCI Q3-2014 survey confirmed an increasing level of uncertainty among the private sector players due to rising electioneering activities and the build up to the 2015 general elections.”
Other sectors on the decline in the confidence index list in the third quarter of 2014 include Building & Construction, which declined by seven per cent with its eight per cent index record in the Q3 below 15 per cent in the Q2.
Oil and Gas recorded five per cent decline (from 14 per cent in Q2 to nine per cent in Q3 and four per cent in Q1); Professional Services declined by two per cent with 13 per cent in Q3 after recording 15 per cent in Q2 as against 10% in the first quarter, while the sector termed ‘Others’ in the index list recorded four cent decline in the Q3.
However, some other sectors have in the last three months, witnessed significant increase in the confidence levels. On that list, financial sector (banks, e-payment operators, finance houses and BDCs) continues to top the league table of business optimism with 32 per cent BCI score in Q3- 2014.
Impressive corporate reported for the period ended June 30 2014 and the recovery of the nationalised banks, according to the statement by LCCI, contributed significantly to the sustenance of optimism among the financial sector operators.
“Notwithstanding, how much the ongoing regulatory induced recapitalisation of the Bureau De Change, BDC, and finance companies will impact the finance sector will be seen over the subsequent quarters,” it stated.
It also stated that business leaders in the financial services sector mentioned macroeconomic fluctuations, policy uncertainty and issues concerning implementation of the new CBN Governor agenda as key sources of concern to them.
Other sectors that have recorded increased business confidence in the 3rd quarter of 2014 include Telecoms / Postal with five per cent confidence level higher than the previous quarter, Distributive Trade recorded eight per cent increase (from 12 per cent in the Q2 to 20 per cent in the Q3 after declined from 17 per ent in Q1), while Hotel & Restaurant recorded three per cent increase in its BCI.
LCCI has attributed the key factor factors mostly depressing the confidence level of business leaders at this time to security challenges across the country, political activities, port gridlock, government policy, as well as epileptic power supply.
It stated that “Nigeria’s BCI scores over the years continue to trail below the 50 per cent global business confidence threshold. Investors and business leaders remain wary about the state of the economy and the challenging business environment.
“The key factors that mostly depressed the confidence level of business leaders at this time are; security challenges across the country, political transition/electioneering activities and associated risks; cargo clearing issues and access to and from the nation’s foremost ports – Apapa and Tin Can; policy uncertainties and regulatory concerns and worsening public power supply.”
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