- Nigeria’s BSI fell to 59.2 in February, the lowest level in a year
- Current FX regime is a concern; the ‘effect of the NGN exchange rate’ indicator fell to 17.5
- FX rate has negatively affected companies’ financial positions and prices paid for imported inputs
- FX woes deepen
Nigerian businesses were concerned about current business conditions, as the economy continues to be pressured by weak oil prices and as a restrictive FX regime significantly overvalue the official exchange rate and constrain new inflows. Nigeria’s FX shortage is affecting the prices companies pay for inputs, demand for Nigeria’s non-oil exports, and companies’ financial positions.
Nigerian firms reported that input prices and prices received for their products increased sharply in February, with prices received reaching a series high. Although the Central Bank of Nigeria (CBN) has kept the official interbank USD-NGN rate steady, the parallel market has continued to depreciate rapidly in recent months (USD-NGN reportedly reached a high of c.400 in the parallel market in February 2016, before retracing subsequently). As a result, Nigerian firms have reported a negative impact on their businesses, as their demand for FX for imports cannot be met in the official market. In some instances, demand was filled by the parallel market at a much higher USD-NGN FX rate.
Commenting on this Razia Khan, head of Research Africa, Standard Chartered Bank said: ‘’The Standard Chartered-MNI Business Sentiment Indicator (BSI) for Nigeria fell to 59.2 in February, its lowest level since February 2015. Although seasonal factors seem to have been partly at play, as activity slows in January and February following an increase over Christmas, Nigerian businesses were mainly concerned about the exchange rate. While 9 of 15 current conditions indicators fell in February, 9 of 15 future expectations indicators rose, likely suggesting that activity may pick up in the coming months. The headline BSI current conditions indicator was still up 2.2% y/y. ‘’
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