The recent surge in Nigeria’s inflation rate to 24.23% in March 2025, following a brief respite after the rebasing of the Consumer Price Index, has sparked concerns within the Organized Private Sector (OPS). Businesses, which had previously advocated for a reduction in the Central Bank of Nigeria’s (CBN) benchmark interest rate of 27.5%, now fear that rising inflation will stifle any potential rate cuts. This apprehension stems from the understanding that central banks typically raise interest rates to combat inflation, and the current upward inflationary trend makes a rate reduction less likely. The OPS emphasizes the heavy burden of high interest rates on businesses, particularly manufacturers who faced lending rates as high as 35.5% in 2024, significantly impacting their investment and expansion plans. Coupled with potential global trade disruptions and a depreciating currency, the OPS anticipates a sustained period of escalating inflation driven by rising food, energy, and logistics costs.
The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) have voiced their anxieties about the economic consequences of maintaining a high interest rate. MAN highlights the substantial financial burden on manufacturers, who incurred N1.3 trillion in finance costs in 2024 due to the elevated interest rates. This financial strain restricts their ability to invest and expand, hindering overall economic growth. LCCI echoes these concerns, expressing apprehension that persistent inflation will dash hopes of any interest rate relief in the near future. The LCCI forecasts a potential resurgence of unrestrained inflation fueled by escalating global trade disruptions, a weakening naira, and rising costs of essential goods like food and energy. While acknowledging a slight easing of food inflation, the LCCI stresses the urgent need for government intervention to bolster agricultural production through infrastructure development and enhanced security in farming regions.
Small and medium-sized businesses (SMEs) also face significant challenges due to rising inflation. The Association of Small Business Owners of Nigeria (ASBON) warns that escalating prices erode purchasing power, drive up raw material costs, squeeze profit margins, and disrupt long-term business planning. ASBON emphasizes the critical need for coordinated monetary and fiscal policies to curb inflation and create a more stable economic environment conducive to SME growth. They advocate for government intervention to stabilize the exchange rate, reduce energy costs, improve infrastructure, and provide targeted support such as low-interest financing and tax relief to mitigate the impact of inflation on SMEs and ensure their continued production.
The Centre for the Promotion of Private Enterprise (CPPE) offers a more nuanced analysis, identifying high energy costs, exchange rate volatility, and insecurity as the primary drivers of Nigeria’s persistent inflation. CPPE’s director, Dr. Muda Yusuf, points to the considerable influence of exchange rate fluctuations and escalating energy prices on production and distribution across key sectors of the Nigerian economy. The reliance on expensive alternative energy sources due to unreliable electricity supply and the recent migration of many producers to Band A with higher energy tariffs have further exacerbated the inflationary pressures. Insecurity in agricultural regions and the incentive for food exports due to the naira’s depreciation against the CFA franc also contribute to rising food prices.
Dr. Yusuf proposes a multi-faceted approach to address these challenges. In the power sector, he advocates for comprehensive reforms across the entire value chain, including gas supply, power generation, transmission, and distribution. He stresses the importance of increased private equity investment and government investment in transmission infrastructure, highlighting the significance of electricity as not only a business imperative but also a critical driver of development. A moderate upward review of electricity tariffs is also recommended to enhance liquidity and attract further investment, alongside stricter measures to curb energy theft and enforce payment of outstanding debts by government institutions. Joint commitment from both the public and private sectors to boost investment in the electricity sector is crucial for long-term sustainability.
In the oil and gas sector, Dr. Yusuf recommends boosting domestic refining capacity and attracting investment in the downstream sector to ensure a steady supply of fuel. On the foreign exchange front, he proposes a dual strategy: stabilizing the exchange rate through CBN interventions and increasing forex earnings by ramping up oil production and promoting non-oil exports. Incentivizing non-oil exports requires improving the overall business environment and addressing logistical challenges at ports to enhance the global competitiveness of Nigerian products.
The combined perspectives of the OPS, ASBON, and CPPE paint a clear picture of the complex challenges facing the Nigerian economy due to rising inflation. Addressing these issues requires a comprehensive and coordinated approach involving fiscal and monetary policy adjustments, targeted interventions to support vulnerable sectors like SMEs, and structural reforms in critical sectors such as power, oil and gas, and foreign exchange management. The emphasis on promoting non-oil exports and improving the business environment highlights the necessity of diversifying the economy and fostering sustainable growth. Ultimately, the success of these measures will depend on the government’s commitment to implementing meaningful reforms and fostering a collaborative approach with the private sector to navigate the current economic headwinds and build a more resilient and prosperous future. Failure to act decisively risks deepening the economic challenges and undermining the potential for inclusive growth and development.
