Nigeria: Business confidence at one-year low on FX concerns
February 29, 2016
In February, the Business Sentiment Indicator (BSI) developed by MNI Indicators and Standard Chartered fell from January’s 61.7 to 59.2, which marked the lowest print since February 2015. That said, the index is firmly entrenched above the 50-threshold that separates contraction from expansion in business conditions.
February’s decrease reflected losses particularly in new orders and production. Standard Chartered analysts point out that, “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.”