The Persistent Challenge of Inflation in Nigeria: A Call for Urgent Action
Nigeria’s battle against soaring inflation continues, with the May 2025 figure standing at 22.97%, a marginal decrease from April’s 23.71%. While this slight easing offers a glimmer of hope, the underlying economic realities paint a concerning picture for businesses and consumers alike. Organized private sector groups are urging the Federal Government to implement previously announced credit schemes to address the root causes of this persistent inflationary pressure.
The marginal decline in inflation can be attributed to several factors, including the lingering effects of past fiscal policies such as tariff waivers on essential goods like food and pharmaceuticals. The relative stability in the foreign exchange market has also contributed to this slight improvement. However, these positive influences are overshadowed by persistent structural constraints that continue to fuel inflationary pressures. High energy and logistics costs, insecurity, and expensive funding remain significant obstacles for businesses, hindering their ability to operate efficiently and contribute to economic growth.
Experts warn that the current inflation rate, while marginally lower, remains alarmingly high. A rate exceeding 22% poses significant challenges to businesses struggling with escalating production costs and consumers grappling with diminished purchasing power. The slight deceleration observed in May should not be misinterpreted as a sign of sustained improvement. The underlying structural issues driving inflation must be addressed decisively to achieve meaningful and lasting price stability.
The private sector emphasizes the urgent need for government intervention to mitigate the impact of these structural constraints. Specifically, they advocate for the accelerated implementation of previously announced credit schemes designed to provide businesses with access to cheaper funds. Expanding the credit call and credit guarantee scheme to encompass both Small and Medium Enterprises (SMEs) and large firms would significantly reduce production costs, thereby contributing to a moderation in inflation. Access to affordable credit is crucial for businesses to invest, expand, and enhance their productivity, ultimately leading to increased supply and lower prices.
However, even with these proposed interventions, external factors threaten to derail progress. The ongoing conflict between Iran and Israel poses a significant risk to global energy prices, with the potential to trigger a new wave of inflation. A further escalation of this conflict could reverse the marginal gains achieved in May and exacerbate the already challenging economic environment. The uncertainty surrounding geopolitical developments underscores the fragility of the current situation and the need for proactive measures to mitigate potential shocks.
To sustain the disinflationary trend and bolster food supply, a coordinated policy approach is crucial. Recommendations include continued monetary tightening by the Central Bank of Nigeria, enhanced access to credit for agricultural and manufacturing sectors, and increased support for dry season farming and mechanized agriculture. Investing in rural-urban logistics, prioritizing spending on food, energy, and transport, eliminating leakages, and strengthening social safety nets for vulnerable households are also critical. These measures aim to address both the supply-side and demand-side factors contributing to inflation while protecting vulnerable populations from the adverse effects of rising prices.
The marginal decline in headline inflation, though welcome, must be interpreted with caution. The underlying structural challenges persist, and external risks loom large. The government must act decisively to implement the proposed credit schemes and adopt a comprehensive policy approach to address the root causes of inflation. Failure to do so risks jeopardizing the modest gains achieved and further exacerbating the economic hardships faced by businesses and consumers. The call to action is clear: urgent and decisive measures are needed to tame inflation and pave the way for sustainable economic growth and stability in Nigeria.
