The overwhelming majority of Nigerian firms identify high energy costs, particularly fuel, diesel and electricity, as the leading cause of inflation in the country, the Central Bank of Nigeria (CBN) has reported.

  This was disclosed in CBN’s May 2025 Inflation Expectation Survey, which highlights worsening concerns about the cost environment for businesses across the country.

  According to the survey, released this week, 90.8 per cent of respondent firms ranked energy costs as the top factor contributing to inflation.  “Respondents (businesses and households) identified energy, exchange rate and transportation as the top three inflation drivers,” the CBN stated in its report.

  “Natural disasters, activities of middlemen and infrastructural challenges were perceived as less significant contributors.”  This finding reflects the persistence of structural supply-side issues that continue to undermine the effectiveness of traditional monetary policy tools such as interest rate hikes.

  While the CBN has maintained a tight monetary stance, with the Monetary Policy Rate (MPR) at 27.5 per cent, the data suggests inflation is largely being fuelled by factors beyond the influence of monetary tightening.

  The second most frequently cited inflation driver is the exchange rate, with 88.5 per cent of businesses highlighting the impact of naira depreciation on the cost of imports and inputs.

  Transportation costs, including road, air, rail, and water logistics, followed closely as another major pressure point, cited by 87.2 per cent of firms.

  Interest rates were ranked as a significant but secondary contributor. Around 85.5 per cent of businesses acknowledged that high borrowing costs were compounding inflationary pressures, particularly for enterprises that rely on credit to finance operations or expansion.

Other issues, such as insecurity, raw material costs and inadequate infrastructure were also widely acknowledged by businesses as contributing to inflation, though to a slightly lesser extent.

  Insecurity was flagged by 84.7 per cent of respondents, while raw material costs and infrastructural constraints were noted by 78.3 and 75 per cent, respectively.

  Although middlemen’s activities and natural disasters were recognised, they were perceived as less critical than the broader structural challenges. The findings from households mirrored those from businesses. Among respondents, transportation ranked second only to energy as a source of inflationary stress. Exchange rate volatility, insecurity and interest rates also ranked high in the perceptions of Nigerian households.

  Overall, the report revealed that inflation expectations worsened in May. Approximately 75.3 per cent of all respondents said they believed inflation was high, a significant jump from 70 per cent in April.