CEOs upbeat about 2014

CEOs upbeat about 2014

Obodo Ejiro

It does not happen every day that members of a research and intelligence unit come face to face with 90 top CEOs at an event. When this however happens, it presents a rare opportunity to feel the pulse of the economy and a chance to peer into the future through executive eyes. 

A week ago, BusinessDay’s Research and Intelligence Unit (BRIU) conducted a survey to gauge the economic outlook of the CEOs for 2014.

The survey, which was conducted at BusinessDay’s CEO Forum 2013, was among other things, designed to examine the perception of CEOs on the performance of business in 2013, and their plans for human and machinery acquisition in the coming year.

Firstly, it is important to point out that major sectors of the economy were represented in the survey.

Twenty percent of surveyed CEOs are from the manufacturing sector; CEOs from the banking and financial services sector make up 10 percent of the respondents, those from the agric sector are 7 percent, while those from retail account for 15 percent of the sample. Others sectors represented include IT, Oil and Gas, telecommunications, etc.

Before hinting on their plans for 2014, they made it clear through their responses that 2013 was a fair year for business in Nigeria. When they were asked about the performance of their businesses in 2013, 76 percent of them affirmed that business was fair while 15 percent tagged 2013 an exceptional year. Only 9 percent of them identified the year as poor for business.

A cross tabulation of responses shows an obvious skew in the direction of retail trade, manufacturing, media consultancy (including media services). Strangely, banking and financial CEOs were not so positive on the performance of business in 2013.

Except for banking, we believe that the current trend is likely to play itself out in 2014, especially for the sectors that boomed in 2013. We anticipate a boom in advertising income and consultancy next year as political gladiators open their chests for ultimate showdown in 2015.

At the macroeconomic level, average GDP growth in Nigeria for the first three quarters of 2013 was 6.51 percent (which is moderate, considering the malignant lull which has prevailed in many economies for almost a decade), while inflation was single digit for most of the year.

In terms of business expansion plans for 2014, more than half, 64 percent, of the CEOs said they have plans of expanding their businesses in the coming year by establishing new branches. CEOs in this category are majorly from the manufacturing and retail sectors. Very few in banking and media consultancy have plans to buoy the number of branches they currently operate.

The business leaders were also asked if they will increase their staff in 2014. Sixty-seven percent showed the green light in the direction, 24 percent said they will maintain their current position while 3 percent hinted that they will downsize.

On a sectorial basis, an equal number of bank and financial services companies’ CEOs indicated that they will scale back or employ more. In the Manufacturing sector, more than three quarter of CEOs said they will employ more, while the rest indicated that they will maintain the status quo.

Considering the fact that acquisition of new machines may be used as a quasi-measure of business expectations, it was deemed fit to ask the CEOs about their plans for machine acquisition. The body language is that of refrain among CEOs.

Generally, there is a nod at the direction of maintaining existing machinery as 2014 dawns for most of them; however, CEOs in agric and manufacturing seem to have the greater appetite for new machine acquisition.

Based on the responses, we believe that 2014 may not be a year of massive changes in machinery inventory, however, most new machinery purchases or replacement will be in the sectors which have been identified already.

The power sector reforms were also considered in the survey. It is gladdening that respondents have faith in the power sector road map. When we asked them if they believe that there will be investment in the power sector and consequently improvement in the sector come 2014, most of them affirmed that there will be a change.

Optimism in economic progress in 2014 is not restricted to Nigeria. The International Monetary Fund (IMF) is expecting worldwide economic growth of 3.6 percent in 2014, up from a projected 2.9 percent this year. The IMF calls 2014 a year of “transitions and tensions.”

It forecasts 7.4 percent GDP growth for Nigeria in 2014, up from an estimated 6.2 percent this year, despite the effects of instability in the north and oil theft, which act as a drag on the economy.

According to the multilateral institution, “as always expansion has continued to be driven majorly by high oil prices [‘if Iran’s sanctions are further tempered next year to allow oil export, oil prices may be affected’] and robust domestic demand. But the country may need to push forward reforms to encourage broad-based development, alleviate poverty and nurture a trend towards diversification”.

Overall, growth in emerging market and developing economies is expected to remain strong at 4½–5 percent in 2013–14, supported by solid domestic demand, recovering exports, and supportive fiscal, monetary and financial conditions.

Commodity prices will continue to boost growth in many low-income countries, including those in sub-Saharan Africa. But economies in the Middle East and North Africa, Afghanistan, and Pakistan region will continue to struggle with difficult economic and political transitions.

The IMF’s projections were made as part of its latest World Economic Outlook (WEO), which noted that sub-Saharan Africa had continued to record growth in 2012 and 2013, thanks to rising domestic consumption. Most of the CEOs sampled have offices within and outside Lagos