Nigeria: CBN Flags Inflation Risks as Rising Input Costs Threaten Business Sustainability

The Central Bank of Nigeria (CBN) has raised concerns over a potential resurgence of inflation, warning that escalating input costs across key sectors could soon translate into higher consumer prices. The caution comes as firms continue to absorb cost increases to protect consumers—a move the apex bank says may no longer be sustainable.

The alert was contained in the June 2025 Purchasing Managers’ Index (PMI) report, which highlights early signs of inflationary pressures emerging from the widening gap between input and output price indices.

According to the CBN, input prices for the composite economy—and across the Industry, Services, and Agriculture sectors—exceeded their corresponding output prices, indicating that businesses are under increasing strain.

“The growing disparity between rising input costs and stagnant output prices is squeezing profit margins. If firms can no longer absorb these pressures, consumer prices may inevitably rise,” the report stated.

The agriculture sector recorded the highest cost absorption index at 9.8 points, signifying the most significant gap between input and output prices. The Services sector had the lowest margin gap at 4.4 points, but similar cost pressures were evident across all sectors.

Despite the cost burdens, Nigeria’s economy showed resilience, with the composite PMI standing at 52.3 index points, reflecting continued expansion in economic activity for the sixth consecutive month. Out of the 36 subsectors surveyed nationwide, 25 reported growth, signaling broad-based momentum.

Sectoral Highlights:

• Industry Sector: Posted a PMI of 51.4 points, marking six straight months of growth, supported by rising production levels. Nine out of 17 industrial subsectors recorded increased activity.

• Services Sector: Reported a PMI of 51.3 points, with 11 of 14 subsectors expanding during the period. The CBN attributed this growth to improved business demand and performance.

• Agriculture Sector: Led the expansion with a robust PMI of 55.2 points—its eleventh consecutive month of growth—fueled by increased farming activities. All five agricultural subsectors saw positive growth in June.

While the overall economic outlook remains positive, the CBN stressed that the continued absorption of cost increases by firms may not be viable in the long term. Should businesses begin passing these costs to consumers, Nigeria could face another wave of consumer price inflation, compounding existing macroeconomic challenges.

The report reinforces the need for targeted policy responses to address structural cost drivers, such as logistics inefficiencies and energy shortages, in order to safeguard price stability and sustain business growth.