The Central Bank of Nigeria (CBN) has revealed that the majority of Nigerian businesses see surging energy costs—especially fuel, diesel, and electricity—as the primary drivers of inflation in the country. This was disclosed in the CBN’s May 2025 Inflation Expectation Survey, which highlights growing concerns over the rising cost environment for businesses nationwide. According to the report, 90.8% of respondent firms identified energy costs as the top inflationary pressure.
The report notes that expenses on petrol (Premium Motor Spirit), diesel, and electricity continue to weigh heavily on business operations, underscoring the persistent structural issues that fuel Nigeria’s inflation challenges.
Despite the CBN maintaining a tight monetary stance with the Monetary Policy Rate at 27.5%, the findings suggest that inflation remains largely driven by supply-side factors—issues that interest rate hikes alone cannot effectively address.
Following energy costs, 88.5% of firms ranked exchange rate volatility as the second-most significant factor influencing inflation, reflecting ongoing concerns over currency instability and the high cost of imports.
Transportation came third, with 87.2% of firms citing road, air, rail, and water transport costs as major inflation contributors. Interest rates followed, with 85.5% of businesses noting that borrowing costs are intensifying inflationary pressure, particularly for credit-dependent firms.
Other notable cost pressures include insecurity (84.7%), raw material input costs (78.3%), and infrastructural challenges (75%). The influence of middlemen and natural disasters was acknowledged by 73% and 63.4% of businesses, respectively, though they were perceived as having a comparatively lower impact.
Among households, transportation costs ranked just behind energy as the second-largest source of inflation (85%), followed by concerns about the exchange rate (82%), insecurity (80%), and interest rates (78.7%).
The CBN emphasized a strong consensus across both businesses and households, with energy, exchange rate instability, and transportation identified as the top three drivers of inflation. The report stated:
“Respondents (Businesses and Households) identified energy, exchange rate, and transportation as the top three inflation drivers. Natural disasters, activities of middlemen, and infrastructural challenges were perceived as less significant contributors in the review period.”
In terms of inflation perception, 75.3% of all survey respondents in May believed the inflation rate was high—up from 70% in April. Among households, the sentiment rose to 79.6%, compared to 69.4% in April, while 71.5% of businesses described inflation as high, slightly above April’s 70.5%.
Large firms were the most concerned, with 78.2% reporting high inflation, followed by micro businesses (72.8%) and medium-sized firms (70.6%).
Households earning between ₦30,001 and ₦100,000 per month were most affected, with 82.9% perceiving inflation as high. Those earning above ₦200,000 reported the lowest inflation perception at 65.7%. Urban and rural households expressed similar views, with 79.8% and 79.3%, respectively, describing inflation as elevated.
Looking ahead, inflation expectations remain cautious. About 43.1% of households and 29.7% of businesses anticipate that inflation will rise in June. On the spending front, 75.1% of firms and 67.1% of households expect their expenditures to increase.
A large majority of respondents (68.9%) expressed a desire for policy easing, calling for lower interest rates. In contrast, only 10.9% supported further hikes, while 20.2% preferred holding rates steady.
According to data from the National Bureau of Statistics, Nigeria’s inflation rate slightly eased to 23.71% in April 2025, down from 24.23% in March—a 0.52 percentage point drop.
Despite this marginal relief, the CBN survey reinforces the argument that Nigeria’s inflation is not solely driven by excess demand or monetary expansion but by deeper structural bottlenecks. With energy, transport, and foreign exchange volatility consistently flagged by both households and businesses, the evidence points strongly to cost-push dynamics at the core of Nigeria’s inflationary pressures.
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