The Central Bank of Nigeria (CBN) has reported that the overwhelming majority of Nigerian firms identify high energy costs, particularly fuel, diesel, and electricity, as the leading cause of rising inflation in the country.
This was disclosed in its May 2025 Inflation Expectation Survey, which highlights worsening concerns about the cost environment for businesses across the country.
According to the report, 90.8% of respondent firms ranked energy costs as the top factor contributing to inflation.
This includes expenses on Premium Motor Spirit (PMS), diesel, and electricity, reflecting how energy supply and pricing remain a core structural challenge in Nigeria’s inflation battle.
The result affirmed that despite the CBN’s tight monetary policy with the Monetary Policy Rate (MPR) at 27.5%, inflation is still being driven predominantly by supply-side pressures, which interest rate tools alone may not effectively resolve.
Exchange rate, transport costs, and interest rates deepen inflation woes
While energy ranked highest, other structural and policy-related issues were also flagged.
- 88.5% of firms cited the exchange rate as the second most significant factor influencing inflation, reflecting concerns about currency volatility and the cost of imported goods. This was followed by 87.2% of firms, who identified transportation costs—including road, flight, water, and rail logistics—as the third-highest driver.
- Interest rates came in fourth, with 85.5% of firms believing it is a major contributor to inflationary pressure. This suggests that while the CBN’s monetary tightening, raising the Monetary Policy Rate to 27.5%, was intended to rein in inflation, it may have added to cost pressures for businesses, especially those reliant on credit for operations or expansion.
- Other significant drivers included insecurity (84.7%), raw material input costs (78.3%), and infrastructural challenges (75.0%), all of which ranked high among firm respondents. Notably, the activities of middlemen (73.0%) and natural disasters (63.4%) were also acknowledged but ranked lower in terms of perceived impact.
- Among households, transportation (85.0%) ranked just behind energy as the second-most influential inflationary pressure, followed by exchange rate fluctuations (82.0%), insecurity (80.0%), and interest rates (78.7%).
The CBN report read, “Respondents (Businesses and Households) identified energy, exchange rate, and transportation as the top three inflation drivers. However, natural disasters, activities of middlemen, and infrastructural challenges were perceived as less significant contributors to inflation drivers in the review period.”
More Nigerians say inflation is high
- In May 2025, 75.3% of respondents believed the current inflation rate was high, up from 70.0% in April. Notably, households recorded the sharpest increase, with 79.6% describing inflation as high, compared to 69.4% the previous month.
- Businesses also echoed this sentiment, with 71.5% saying inflation was high, a slight increase from April’s 70.5%. Perceptions of moderate and low inflation declined across the board, reinforcing widespread concern over rising living costs. Also, 78.2% of large firms reported high inflation, the most among business sizes, while micro and medium firms followed with 72.8% and 70.6%, respectively.
- Households earning between N30,001 and N100,000 felt inflation the hardest at 82.9%, while those earning above N200,000 had the lowest perception of high inflation (65.7%).
- Urban and rural households both expressed strong inflation concerns, with 79.8% and 79.3%, respectively, describing the current rate as high.
Looking ahead, 43.1% of households and 29.7% of businesses expect inflation to rise in June, while 75.1% of businesses and 67.1% of households expect their expenditure to increase this month.
Also, a majority of respondents (68.9%) want the CBNs to reduce interest rates, while only 10.9% support a rate hike and 20.2% prefer it remains unchanged.
What you should know
Nigeria’s inflation rate eased to 23.71% in April 2025, down from 24.23% recorded in March, according to the National Bureau of Statistics (NBS). The figure marks a modest decline of 0.52 percentage points, offering a glimmer of hope amid persistent economic challenges and rising cost-of-living pressures across the country.
The latest CBN report reinforces the argument that Nigeria’s inflation crisis is not driven solely by demand or money supply, but by persistent structural bottlenecks.
With both firms and households ranking energy, transport, and exchange rate issues as top contributors, it is clear that Nigeria’s inflationary spiral is being fuelled largely by cost-push factors.
