The Central Bank of Nigeria (CBN) has raised concerns over a possible spike in inflation as businesses struggle with soaring production costs. While companies have so far absorbed these expenses rather than raising prices for consumers, the CBN warns that this trend may soon reverse, leading to higher inflation that could strain household budgets.
This outlook comes from the CBN’s Purchasing Managers’ Index (PMI) report for June 2025, which analyses economic trends across Nigeria’s major sectors. The report reveals a growing imbalance between input costs (such as raw materials and labour) and output prices, with businesses facing squeezed profit margins. If firms can no longer bear these costs, they may be forced to hike prices, triggering a new wave of inflation.
Agriculture was hit hardest, with a 9.8-point gap between input and output prices, the largest of any sector. Rising costs for seeds, fertilizers, and logistics have not been fully passed on to consumers.
Industry also faced elevated costs, though the gap was narrower than in agriculture. Services showed the smallest cost pressure, with a 4.4-point gap, indicating relatively better resilience.
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Despite cost challenges, Nigeria’s economy grew for the sixth straight month, with the composite PMI at 52.3 points (above the 50-point growth threshold). 25 out of 36 sub-sectors recorded expansion, signalling broad-based growth. Agriculture led with a PMI of 55.2, marking 11 months of consecutive growth due to increased farming activity.
Industry expanded for the sixth month (PMI: 51.4), driven by higher production in 9 out of 17 subsectors. Services grew (PMI: 51.3), with 11 out of 14 sub-sectors reporting increased activity, supported by demand in telecoms, hospitality, and finance.
While the report highlights Nigeria’s economic resilience, the widening cost-price gap, especially in agriculture, poses a threat. If businesses can no longer absorb rising expenses, consumer prices could surge, eroding purchasing power.
The CBN’s warning underscores the need for policy measures to stabilise input costs and sustain growth without triggering runaway inflation. As Nigeria navigates these challenges, balancing economic expansion with price stability will be crucial in the coming months.
