Nigeria’s inflation rate drops to 24.48% year-on-year in January 2025, down from 34.80% in December 2024, following a rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS). The rebasing, which updated the base year from 2009 to 2024, reflects changes in consumer spending patterns and provides a more accurate measure of inflation trends.
The rebasing of the CPI is a routine statistical exercise aimed at ensuring inflation calculations reflect current economic realities. The National Bureau Statistics stated that the rebasing was necessary to reflect changes in consumption patterns. The previous base year, set in 2009, no longer captured recent changes in spending patterns, product availability, and economic conditions. By shifting the base year to 2024, the NBS has incorporated newer data, providing a clearer view of inflation trends.
However, this rebasing does not mean inflation has reduced in real terms. Instead, it adjusts the method of measurement, leading to a recalibration of the official figures.
Food inflation, which significantly impacts the cost of living, stood at a year-to-year rate of 26.08% in January after the rebasing. However, despite this slight easing, food prices remain high due to logistics issues, supply chain disruptions, and naira depreciation.
The Central Bank of Nigeria (CBN) has committed to tackling inflation through monetary tightening and exchange rate stability. However, for businesses, especially small and medium enterprises (SMEs) high inflation continues to pose challenges, affecting cost structures, consumer purchasing power, and financing conditions. Source: Reuters
Impact of Inflation On Nigerian Businesses
1. Rising Business Costs Despite Inflation Drop
Despite that Nigeria’s inflation rate drops following the rebasing, the cost of doing business remains high. Many businesses continue to struggle with rising expenses for raw materials, transportation, rent, and wages.
For businesses that rely on imports, the depreciation of the naira continues to make foreign goods and services more expensive. The manufacturing sector, in particular, faces difficulties as the cost of importing machinery and raw materials has eroded profit margins.
This means that, even with a lower inflation figure on paper, the real impact on businesses is still severe, forcing many to adjust pricing, reduce expenses, or explore local alternatives to stay afloat.
2. Reduced Consumer Spending
Inflation weakens consumer purchasing power, and even with a decline in the official rate, Nigerians are still prioritising essential goods over discretionary spending. Businesses in retail, hospitality, and entertainment continue to see slower demand as consumers cut back on non-essential expenses.
This shift requires businesses to adapt their offerings and pricing strategies. Some companies may need to focus on lower-cost alternatives, bulk discounts, or flexible payment plans to attract and retain customers.
3. Higher Interest Rates Affect Business Loans
Inflation often leads to higher interest rates, making it more expensive for businesses to secure loans. The CBN’s monetary tightening measures mean that borrowing costs are unlikely to ease in the short term, affecting SMEs that rely on credit for operations and expansion.
Entrepreneurs should explore alternative financing options such as:
- Government-backed SME loans and intervention funds.
- Private sector grants and investment partnerships.
- Equity financing instead of debt financing.
How Nigerian Entrepreneurs Can Adapt to Inflation
1. Cost Optimisation and Local Sourcing
To stay competitive, businesses must cut unnecessary costs and find local alternatives. This includes negotiating better supplier deals to reduce procurement costs, sourcing raw materials locally to avoid exchange rate volatility and leveraging technology to automate processes and minimise operational expenses.
By reducing reliance on imported goods, businesses can protect themselves from naira fluctuations and stabilise costs.
2. Smart Pricing Strategies
Rather than simply increasing prices, businesses can explore value-based pricing that highlights the benefits of their products, offer smaller product sizes to cater to cost-conscious customers and subscription-based models to generate stable, recurring revenue.
Adapting pricing strategies will help businesses maintain customer loyalty while managing rising costs.
3. Exploring Government and Private Sector Support
The Nigerian government and financial institutions have introduced various programs to help businesses cope with inflation, including CBN intervention funds for SMEs, tax relief programs for struggling businesses, business grants, and low-interest loans.
Entrepreneurs should actively seek out these opportunities to reduce financial pressure and sustain operations.
4. Investing in Resilient Sectors
Certain industries are better equipped to withstand inflationary pressures. Businesses in sectors such as Agriculture and food production, healthcare and pharmaceuticals, renewable energy, and fintech tend to perform well even during economic downturns. Entrepreneurs looking to diversify their revenue streams should consider shifting towards these more stable industries.
What’s Next for Nigeria’s Inflation Outlook?
Despite the reported decline in the inflation rate, prices remain high, and economic uncertainty persists. The government’s economic policies, including subsidy removals and exchange rate adjustments, continue to shape inflationary trends.
The CBN’s monetary tightening policies suggest that interest rates will stay high, making borrowing expensive for businesses. However, if the government’s efforts to boost local production and stabilise the naira prove effective, inflationary pressures could gradually ease in the coming months.
For now, businesses must remain agile, focus on cost efficiency, and explore innovative strategies to survive and thrive in a challenging economic environment.
Conclusion
Nigeria’s inflation rate may have declined to 24.48% after rebasing, but the challenges for businesses remain. Rising costs, reduced consumer spending, and high interest rates continue to put pressure on entrepreneurs.
To navigate these conditions successfully, businesses must focus on cost efficiency and supply chain optimisation, adaptive pricing strategies to retain customer, seeking government and private sector funding opportunities and exploring inflation-proof sectors like agriculture, fintech, and essential goods.
How is inflation affecting your business? What strategies are you using to cope? Share your experiences in the comments.
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