In April 2025, Nigeria’s inflation rate marginally declined to 23.71% from 24.23% in March, according to the National Bureau of Statistics. Despite this slight decrease, inflation perceptions among businesses and households remain influenced by several critical factors. The Central Bank of Nigeria’s (CBN) Inflation Expectation Survey Report highlights energy costs, exchange rates, transportation expenses, interest rates, and insecurity as the top five drivers shaping these perceptions.
Energy Costs Lead Inflation Concerns
Energy prices, encompassing petrol, diesel, and electricity, emerged as the most significant factor, with 91% of respondents identifying them as a primary driver of inflation perception. In April, petrol prices fluctuated between ₦870 and ₦920 per liter, exacerbating cost pressures for both households and businesses. Electricity tariffs also remained a concern, with Band A customers paying ₦209 per kilowatt-hour (kWh) for a minimum of 20 hours of daily power supply, while Band B customers faced rates of ₦63 per kWh. These rising costs have strained household budgets and business operations, contributing to the overall inflationary environment.
Exchange Rate Stability and Its Impact
The exchange rate was the second most influential factor, affecting 87.8% of respondents’ inflation perception. Despite stabilizing between ₦1,589/$1 and ₦1,605/$1, businesses and consumers remained sensitive to exchange rate fluctuations due to their impact on import prices and overall inflation. The depreciation of the naira has led to increased costs for imported goods, further fueling inflationary pressures.
Transportation Costs on the Rise
Transportation expenses ranked third, with 86.7% of respondents citing them as a significant contributor to inflation perception. The removal of fuel subsidies and fluctuating fuel prices have driven up transportation costs across road, flight, water, and rail travel. Additional charges such as toll fees, port handling expenses, storage fees, and cargo insurance have further elevated expenses, impacting both consumers and businesses.
Interest Rates Influence Borrowing and Investment
Interest rates were the fourth major factor, influencing 85.3% of respondents. The CBN maintained interest rates at 27.5% in February, with treasury bill yields trending downward to 19%, creating a flat yield curve that affected borrowing and investment behavior. High-interest rates have made borrowing more expensive, potentially slowing down business expansion and consumer spending.
Insecurity and Its Economic Implications
Security concerns were identified as the fifth most influential factor, with 83.9% of respondents linking insecurity to rising inflationary pressures. In April 2025, major security incidents in Benue and Plateau States, including the tragic killing of 56 people in Logo and Gbagir communities, raised concerns about stability and its effect on economic activity. Insecurity disrupts agricultural production and supply chains, leading to food shortages and increased prices.
Inflation Expectations Among Businesses and Households
The survey results revealed differing expectations between businesses and households regarding future inflation trends. Among businesses, 55.2% expected no change in inflation over the next month, 31.4% predicted an increase, and 13.4% anticipated a decline. In contrast, households expressed greater concern, with 41% expecting inflation to rise in May, 41.5% predicting no change, and 17.5% foreseeing a decline.
Looking ahead to the three-month outlook, 36.3% of businesses expected inflation to rise, 38.7% foresaw stability, and 25% predicted a decrease. The six-month projections were more evenly split, with 37.3% forecasting an increase, 31.6% expecting price stability, and 31.1% anticipating lower inflation.
Conclusion
In April 2025, Nigerian businesses and households identified energy costs, exchange rates, transportation expenses, interest rates, and insecurity as the top drivers of inflation perception. While the inflation rate showed a slight decline to 23.71%, these factors continue to influence economic stability and consumer confidence. Addressing these challenges requires coordinated efforts to stabilize energy prices, manage exchange rates, improve security, and create an environment conducive to investment and growth.
