Market News

BY Arinze Nwafor and Josephine Ogundeji

Members of the Organised Private Sector have expressed fear that the recent uptick in Nigeria’s inflation rate risks shattering initial hopes of a reduced interest rate.

According to the National Bureau of Statistics, the country’s headline inflation rose to 24.23 per cent in March 2025, up from February’s 23.18 per cent.

March’s inflation rate marked the first spike since the Consumer Price Index was rebased in January, pushing inflation down to 24.48 per cent from the December 2024 rate of 34.80 per cent.

The PUNCH reported that OPS members had urged the Central Bank of Nigeria ahead of its next Monetary Policy Committee meeting on May 19 and 20 to signal growth in the economy by reducing the interest rate, which has remained stagnant at 27.5 per cent.

However, increasing inflation appears to put a risk at the possibility of a reduced interest rate.

OPS members, including the Manufacturers Association of Nigeria and Lagos Chamber of Commerce and Industry, in respective statements, lamented the burden of a high interest rate on manufacturers and the possibility of global trade disruptions engendering another phase of unabated rising inflation.

Director-General of MAN, Segun Ajayi-Kadir stated that manufacturers in 2024 grappled with commercial bank lending rates of up to 35.5 per cent as a result of Nigeria’s 27.5 Monetary Policy Rate, which ranks sixth highest globally.

“Rising interest rates posed a major financial burden, with commercial bank lending rates to manufacturers surging to 35.5 per cent in 2024 from 28.06 per cent in 2023,” Ajayi-Kadir stated. “This was driven by continuous CBN rate hikes, which raised the MPR to 27.50 per cent. Consequently, manufacturers’ finance costs totalled N1.3tn, constraining investment and expansion plans.”

Similarly, LCCI President Gabriel Idahosa decried what an unreduced interest rate meant for the economy.

Idahosa worried that the increased inflation rate dimmed hopes of a reduction in the interest rate.

He also pointed out that the inflation is worsened by ongoing global trade disruption and a depreciating currency risks throwing the country into “another phase of unabated rising.”

“With headline inflation rising again, the hope of seeing a reduction in the interest rate may go dim if the rising inflationary pressures are not controlled,” the LCCI president explained. “With estimated disruptions to global trade becoming a concern to many and a depreciating currency, we may begin to see another phase of unabated rising inflation driven mainly by food, energy, and logistics costs.”

The LCCI acknowledged that food inflation eased to 21.79 per cent in March, but insisted that the Federal Government must keep up pressure to increase output by providing agricultural production infrastructure.

“Government must remain focused on boosting food production through ongoing policy reforms and expected quick actions with the declaration of a national emergency on food security,” Idahosa maintained. “During the emergency period, we expect the government to pay more attention to agricultural production infrastructure, boost food processing potentials, and sustain the fight against insecurity in affected areas.”

Meanwhile, President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said in an interview with The PUNCH that the rising inflation rate poses a serious threat to the real sector.

Egbesola warned that March’s increasing inflation risked “eroding purchasing power, increasing the cost of raw materials, compressing profit margins, and making long-term planning extremely difficult for small and medium businesses.”

ASBON’s president called on the Federal Government to align its monetary and fiscal policies to tame inflation and ensure a more stable economic environment for the real sector to thrive.

“To halt this upward trend, the government must take urgent steps to stabilise the exchange rate, reduce energy costs, and improve infrastructure to lower the cost of doing business,” Egbesola noted. “Additionally, targeted support such as low-interest financing and tax relief for small businesses will help cushion the impact and sustain production.”

Taking a more in-depth analytical approach, the Centre for the Promotion of Private Enterprise identified high energy costs, forex volatility, and insecurity as key drivers of Nigeria’s persistent inflation, urging comprehensive reforms to address the problems.

CPPE Director Dr Muda Yusuf, in an interview with The PUNCH, said that the spike in core inflation in March (24.43 per cent) was largely driven by exchange rate pressures and rising energy costs, which affect production and distribution across key sectors of the economy.

“The Nigerian economy is highly sensitive to exchange rate movements and also highly sensitive to energy prices,” Dr Yusuf asserted. “Businesses faced severe challenges due to erratic power supply, forcing them to rely on expensive alternative energy sources.”

He added that many producers had been moved to Band A, further raising their energy bills, stating, “Energy costs seem to be a major factor in what has happened.”

Yusuf also pointed to insecurity in farming regions and food exports as additional inflationary pressures. “The continued depreciation of the naira against the CFA franc has created an incentive for food exports. It is now more profitable for merchants to export than to sell locally,” he noted.

On solutions, the CPPE boss called for urgent reforms across the power and oil and gas sectors. He said improving power supply required fixing challenges across the value chain, including gas supply, power generation, transmission, and distribution.

“The private investors need to inject more equity capital, not debt. The government must also invest in transmission infrastructure. Electricity is not just a business issue — it’s a development imperative,” he stressed.

The CPPE director advocated a moderate review of electricity tariffs to boost liquidity and attract more investments, while also calling for stricter measures to curb energy theft and settle debts owed by government institutions.

“Both the private and public sectors need to commit to improving investment in the electricity sector,” he remarked. “The fundamental challenge of ensuring liquidity in the sector will require that it generates fairly sufficient revenue to ensure that we have adequate cash flow or liquidity.

“There may be a need to review the tariff. I’m not talking about band A only now, but even the other bands. There will be a need for a moderate review, not a huge review, because we also need to worry about energy access by the citizens, the common people, and industries.”

For the oil and gas sector, Yusuf urged the Federal Government to ramp up domestic refining and attract investment in the downstream sector to guarantee a stable fuel supply.

On foreign exchange, he recommended a two-pronged approach: improving stability through CBN interventions and boosting forex earnings by increasing oil production and promoting non-oil exports.

“A lot more needs to be done to incentivise non-oil exports. We must improve the business environment and fix port logistics to make Nigerian products competitive regionally and globally,” the economist urged.