Survey finds 90.8% of firms cite energy costs as primary inflation driver in May

The Central Bank of Nigeria (CBN) has revealed in its May 2025 Inflation Expectation Survey that an overwhelming 90.8 percent of Nigerian firms identify high energy costs—including Premium Motor Spirit (PMS), diesel, and electricity—as the leading cause of rising inflation.

The findings underscore the persistent structural challenges facing businesses, despite the CBN’s tight monetary policy (27.5 percent Monetary Policy Rate).

According to the survey, energy-related expenses topped the list of supply-side pressures driving inflation, reaffirming that interest rate tools alone may not effectively address cost-push factors.

The report shows that: Energy Costs: 90.8 percent of firms ranked energy (fuel, diesel, electricity) as the top inflation driver, reflecting how volatile energy supply and pricing continue to strain production and operating costs.

Exchange Rate Volatility: 88.5 percent cited the naira’s fluctuations as the second-most significant contributor, highlighting concerns over the rising cost of imported inputs.

Transportation Costs: 87.2 percent identified transport expenses—covering road, air, water, and rail logistics—as the third-highest factor, pointing to deteriorating road networks and high freight rates.

Interest Rates: 85.5 percent of firms flagged borrowing costs as a major inflationary pressure, suggesting that the CBN’s rate hikes have increased firms’ financing burdens.

Insecurity: 84.7 percent blamed insecurity-related disruptions—kidnappings, militancy, and banditry—for driving up costs and hampering supply chains.

Raw Material Input Costs: 78.3 percent pointed to expensive inputs as a key factor, exacerbated by import dependence and local production shortfalls.

Infrastructure Deficits: 75.0 percent cited poor infrastructure—roads, power, and port facilities—as contributing to higher operating and logistical expenses.

Middlemen Activity: 73.0 percent highlighted the margin demands of intermediaries, which inflate prices for end consumers.

Among households surveyed, energy costs similarly dominated; transportation ranked as the second-most significant inflation driver at 85.0 percent, followed by exchange rate fluctuations at 82.0 percent, insecurity at 80.0 percent, and interest rates at 78.7 percent.

READ ALSO: CBN holds interest rate at 27.5% amid inflation moderation, exchange rate stability

Overall inflation perceptions surged in May. The report indicates that 75.3 percent of all respondents—businesses and households combined—deemed the current inflation rate “high,” up from 70.0 percent in April. This seasonal uptick was most pronounced among households, where 79.6 percent reported high inflation (versus 69.4 percent in April). Businesses followed closely, with 71.5 percent (compared to 70.5 percent in April).

Looking ahead to June 2025, 43.1 percent of households and 29.7 percent of businesses expect inflation to rise. In turn, 75.1 percent of firms and 67.1 percent of households anticipate their expenditures will increase in June.

The survey also reveals that a majority, 68.9 percent, want the CBN to reduce its policy rate; 10.9 percent support a further rate hike, while 20.2 percent prefer it remain unchanged.

The survey coincides with data from the National Bureau of Statistics (NBS), which reported that Nigeria’s headline inflation eased to 23.71 percent in April 2025—down from 24.23 percent in March, marking a modest 0.52 percentage point decline.

The survey’s results reinforce the argument that Nigeria’s inflation crisis is driven largely by cost-push pressures rather than excess demand or money supply.

With both firms and households ranking energy, transport, and exchange rate volatility as primary contributors, the findings suggest policy measures must extend beyond interest rate adjustments. Structural reforms—addressing energy supply, currency stability, transport infrastructure, and security—are imperative to mitigate inflationary pressures and stabilize living costs across Nigeria.