The Central Bank of Nigeria (CBN) has warned that rising input costs across key sectors of the economy could trigger a fresh wave of consumer price inflation, as businesses struggle to continue absorbing escalating production expenses.
This caution was contained in the June 2025 Purchasing Managers’ Index (PMI) report, released by the apex bank, which pointed to a growing mismatch between input and output prices—a trend that could soon force businesses to pass on costs to consumers.
“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.
Input-Output Price Gap Widening
According to the report, input price indices for the composite economy, as well as for the Industry, Services, and Agriculture sectors, exceeded their respective output price indices, indicating that companies are currently absorbing cost pressures instead of transferring them to customers.
The agriculture sector posted the highest cost absorption index at 9.8 points in June—the widest input-output price gap—while the Services sector recorded the lowest gap at 4.4 points.
PMI Growth Continues Across Sectors
Despite the inflationary pressure, Nigeria’s economy maintained positive momentum in June, as reflected in the composite PMI score of 52.3 index points, marking the sixth consecutive month of expansion.
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The Industry sector recorded a PMI of 51.4, led by increased production activities. Out of 17 subsectors, nine posted growth.
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The Services sector posted 51.3 index points, with 11 of 14 subsectors expanding, attributed to a sustained rise in business activity.
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The Agriculture sector led all segments with a PMI of 55.2 index points, its eleventh consecutive month of growth, bolstered by seasonal farming activities. All five subsectors in agriculture reported growth in June.
Overall, 25 of the 36 subsectors surveyed across Nigeria reported increased business activity in June, highlighting broad-based economic resilience despite mounting cost pressures.
Implications for Inflation and Policy
Analysts say the warning from the CBN may indicate a potential upward revision of monetary policy stance in coming months, especially if cost absorption becomes untenable for producers and businesses begin hiking prices.
With the inflation rate already in double digits and food inflation at record highs, any upward shift in consumer prices due to pass-through costs may erode purchasing power further and strain household budgets.
