Nigeria: Spillovers from FX restrictions drive business confidence to a series low in March
March 31, 2016
In March, the Business Sentiment Indicator (BSI) developed by MNI Indicators and Standard Chartered fell from February’s 59.2 to a series low of 51.4. That said, the index is still above the 50-threshold that separates contraction from expansion in business conditions.
While March’s decrease reflected losses across the five components of the index, they were particularly severe in new orders. Standard Chartered analysts point out that, “inflation in Nigeria has picked up rapidly in recent months as a result of fuel shortages and the ongoing impact of FX restrictions. Activity is being pushed into the parallel market where there is a much higher USD-NGN (Nigerian naira) rate than on the official market, where FX availability is limited. The higher parallel market FX rate is helping to drive inflation. […] While the official USD-NGN exchange rate has been unchanged, inflationary pressures appear to be being driven by activity at a much higher parallel market rate (c.320 against the USD).”