In a revealing new report, the Central Bank of Nigeria (CBN) has disclosed that a vast majority of Nigerian firms attribute the country’s stubbornly high inflation to escalating energy costs and worsening exchange rate volatility.
The disclosure is contained in the CBN’s May 2025 Inflation Expectation Survey, which examined the outlook of businesses and households regarding current inflation trends and future projections. According to the findings, 90.8% of surveyed firms identified energy costs—including petrol, diesel, and electricity—as the primary driver of inflation, emphasizing the continued impact of supply-side constraints.
This underscores a troubling reality for Nigeria’s economic managers: that despite monetary tightening and interest rate hikes (the Monetary Policy Rate currently stands at 27.5%), the inflationary trend remains largely beyond the control of interest-rate-based interventions. The CBN report suggests that inflation is not being propelled solely by demand or money supply, but by structural deficiencies in energy supply, transport infrastructure, and currency management.
The second most cited inflationary pressure was the volatile exchange rate, highlighted by 88.5% of firms. Businesses pointed to the rising cost of imported goods and the unpredictability of forex access as key factors squeezing their operating margins and pushing up prices for consumers.
Also contributing significantly to inflation, 87.2% of firms named transportation costs—across roads, air, water, and rail—as a top concern. With fuel prices soaring and logistics challenges mounting, distribution costs have risen, cascading into higher prices for goods and services across the board.
Despite the central bank’s high interest rate stance to curb inflation, 85.5% of firms still blame interest rates for adding pressure, especially for credit-dependent small and medium enterprises. Many firms argued that high borrowing costs have stifled expansion, delayed investments, and increased operational costs.
Other significant inflationary drivers cited include insecurity (84.7%), raw material shortages (78.3%), and poor infrastructure (75.0%). While natural disasters (63.4%) and middlemen activities (73.0%) were seen as less impactful, they remain part of the inflation ecosystem.
Among households, energy costs were also ranked the most severe inflationary factor, followed by transportation (85.0%), exchange rate fluctuations (82.0%), and insecurity (80.0%). Households earning N30,001 to N100,000 monthly were the most affected, with 82.9% perceiving inflation as high, while wealthier households (earning over N200,000) were relatively less impacted (65.7%).
Urban and rural respondents shared similar inflation concerns, with 79.8% and 79.3%, respectively, describing the inflation rate as high.
Looking ahead, 43.1% of households and 29.7% of businesses expect inflation to worsen in June 2025, while over 75% of businesses and 67% of households anticipate spending more in the coming month. The outlook reflects widespread anxiety about rising costs and shrinking purchasing power.
Amid these pressures, there is a growing call for policy easing. The survey reveals that 68.9% of respondents prefer a reduction in interest rates, while only 10.9% favour further hikes and 20.2% recommend keeping rates steady.
While the National Bureau of Statistics reported a modest decline in Nigeria’s inflation rate—from 24.23% in March to 23.71% in April 2025—this slight drop offers little comfort to businesses and households grappling with daily cost spikes. The CBN’s report reinforces the need for a more holistic approach to inflation control—one that tackles energy reforms, exchange rate stabilization, security, and infrastructure development.
Experts have called on the federal government to complement the CBN’s monetary policy with aggressive fiscal and structural reforms. Economic analyst Ifeanyi Anene noted, “We can’t solve cost-push inflation with monetary tools alone. What’s needed is energy security, forex market stability, and a serious infrastructural overhaul.”
As Nigeria braces for another wave of inflationary uncertainty, the latest CBN data serves as a stark reminder that inflation in the country is a structural issue—deeply rooted in supply-side weaknesses, and unlikely to abate without comprehensive intervention beyond interest rates.