Confidence levels remain high among the majority of executives interviewed for the 2018 edition of the Business Barometer: Nigeria CEO Survey carried out by Oxford Business Group (OBG), although accessing credit continues to present problems for many entrepreneurs and risks hampering the country’s efforts to diversify its economy away from a reliance on oil.
As part of its survey on the economy, the global research and consultancy firm asked 124 C-suite executives from across Nigeria’s industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment.
When asked, 85% of respondents said they had positive or very positive expectations of local business conditions for the coming 12 months, up marginally from 84% in OBG’s first survey on Nigeria, which was carried out in 2017.
However, 90% of business leaders interviewed – the same proportion as in 2017’s survey – described the ease of access to credit in the country as difficult or very difficult, indicating that borrowing remains a major hurdle for many, especially small- and medium-sized enterprises, which account for around 60% of the economy.
Executives were more divided about what they felt to be the biggest challenge to doing business in Nigeria, with equal numbers (31%) citing access to capital and corruption as the main obstacles to smooth-running entrepreneurial activity.
OBG’s survey also highlighted the dominant role that oil continues to play in the economy, despite Nigeria’s diversification plans. More than four fifths (82%) of interviewees said they regarded a rise in oil prices as the top external event that could impact the national economy in the short to medium term, perhaps indicating that the recession of 2016, caused by the oil price shock, remains fresh in the minds of many.
However, most business leaders were upbeat about Nigeria’s immediate growth prospects. Some 69% of respondents said they expected the economy to expand by between 1% and 3% over the next 12 months, broadly in line with OBG’s forecasts and those of the IMF, which has predicted growth of 2%.
Commenting on the results in her blog, Souhir Mzali, OBG’s regional editor for Africa, said that while Nigeria’s economy grew by 0.8% in 2017, compared to a contraction of 1.6% in 2016, the fact remained that its recovery was driven largely by higher international oil prices and increased domestic output of the commodity.
“Nigeria’s return to positive growth in 2017 is certainly reassuring for both the domestic and international business community, and puts the economy on a surer footing,” she commented. “These improved economic fortunes have brought with them a number of positive developments. However, more remains to be done to achieve economic diversification.”
Mzali added that even though the country possesses several competitive advantages and has announced a record budget of ₦9.12tn (US$25.2bn) for 2018 in a bid to stimulate growth, transforming the structure of its economy will be no easy task.
“Despite attempts to diversify the nation’s revenue base, the non-oil sector grew by a mere 0.8% in the first quarter of 2018, compared to the oil sector’s 14.8%,” she said.
Growth is likely to continue to be driven by oil and subject to potential price fluctuations in the near term, Mzali noted, while medium- to long-term plans to provide for a more diverse economy firm up.