Rising input cost inflation may trigger price hikes in Nigeria as CBN warns businesses can no longer absorb unsustainable cost pressures
[dropcap]R[/dropcap]ising input cost inflation has emerged as a serious threat to Nigeria’s economy, according to a warning from the Central Bank of Nigeria (CBN).
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In its June 2025 Purchasing Managers’ Index (PMI) report, the CBN flagged growing cost pressures across major sectors, cautioning that businesses may soon be forced to pass these burdens on to consumers.
The PMI report revealed that input costs in industry, services, and agriculture all surpassed their respective output prices, signalling an imbalance that could destabilise business margins. This situation, the CBN explained, cannot persist indefinitely without economic consequences.
“The increase in the gap between higher input costs and output price tends to mount pressure on business profit margins.
Cost absorption by firms is likely to be unsustainable in the long term and may foreshadow future consumer price inflation,” the report stated.
Among all sectors, agriculture was hit hardest, registering a cost absorption index of 9.8 points in June.
This indicates the widest disparity between rising input costs and stable output prices. Services followed with a gap of 4.4 points, the narrowest but still indicative of strain.
Despite these challenges, the economy showed signs of resilience. The composite PMI stood at 52.3 index points, signalling expansion in overall economic activity for the sixth month running.
Growth was not isolated. Out of 36 subsectors surveyed, 25 reported increases in business activity.
In the industrial sector, a PMI of 51.4 points reflected its sixth consecutive month of expansion. Nine of the seventeen industrial subsectors reported stronger output levels, suggesting that demand remains healthy, at least for now.
The services sector, with a PMI of 51.3 points, also demonstrated steady growth. Eleven out of its fourteen subsectors experienced increased business activity, driven largely by consumer-facing services and support activities.
The standout performer was agriculture. With a PMI of 55.2 points, the sector not only led overall economic growth but also recorded its eleventh straight month of expansion.
Farming activity surged across all five of its subsectors in June, supported by favourable weather and seasonal production cycles.
Yet, the outlook is far from stable. The underlying concern, according to the CBN, is the silent accumulation of financial stress within businesses that continue to shield consumers from cost increases.
A senior economist at a Lagos-based think tank noted, “This situation is unsustainable. If firms continue absorbing these costs, we risk a collapse in business viability.
If they don’t, we’re looking at a sharp rise in consumer inflation.”
The central bank has repeatedly emphasised that price stability is a core mandate. It views this latest trend as a potential reversal of recent inflation control gains.
Rising input costs, particularly in food production and manufacturing, can quickly lead to broader consumer inflation if not checked.
Despite current economic growth, analysts warn that the inflationary threat could undermine confidence. If businesses begin passing on costs en masse, consumers may experience price shocks in the coming months.
One policy analyst commented, “Inflation doesn’t just hurt consumers; it erodes real income, depresses consumption, and can ultimately weaken economic growth.”
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While the PMI offers a snapshot of momentum, it also serves as a warning signal. Without intervention, rising input cost inflation could be the trigger for a renewed inflationary cycle in Nigeria one that could prove harder to reverse.
Oreoluwa is an accountant and a brand writer with a flair for journalism.
