Growing concern on prices and general cost of living – Inflation Perception Index
The Central Bank of Nigeria’s (CBN) Inflation Perception Index for August 2025 reveals growing concern among Nigerians regarding rising prices and the general cost of living. The index stood at 62.8 points, showing a noticeable uptick in inflationary sentiment across households and businesses. According to the report, 70.6% of respondents perceived inflation as high in August 2025, compared to 66.2% in July 2025. This reflects a widening sense of price pressure across the economy, particularly among households who reported a sharp rise in perceived inflation—from 63.4% in July to 70.9% in August.
When analyzed by firm size, large businesses recorded the highest inflation perception at 76.9%, likely reflecting their exposure to extensive production costs and import-related expenses. They were followed by micro enterprises at 72.8%, medium-sized firms at 68.3%, and small businesses at 67.4%. This pattern indicates that inflation concerns cut across all segments of the economy, although the intensity varies depending on operational scale and cost structure.
The report also highlights a rural-urban disparity in inflation perception. Respondents in rural areas (72.8%) were slightly more likely to perceive inflation as high compared to those in urban centers (70.2%), suggesting that rural communities may be feeling stronger effects from food price increases and transportation costs. Income group analysis further showed that households earning between ₦30,001 and ₦100,000 had the highest proportion of respondents who viewed inflation as significantly high, underscoring the squeeze on middle- and lower-income earners who are particularly vulnerable to rising living costs.
Respondents identified energy costs, exchange rate pressures, and transportation expenses as the leading contributors to the heightened inflation perception. Frequent increases in fuel prices and energy tariffs, combined with fluctuations in the naira exchange rate, have driven up the costs of goods and services across sectors. In contrast, factors such as natural disasters, activities of middlemen, and infrastructural bottlenecks were considered relatively minor influences on inflation during the review period.
While inflation perception does not necessarily equate to actual inflation, it plays a critical role in shaping economic behavior. A persistently high inflation perception can dampen consumer confidence, reduce household spending, and constrain business investment—especially among micro and small enterprises, which have limited capacity to absorb rising input costs.
To mitigate these challenges, the government must intensify its efforts to stabilize the macroeconomic environment. Policies aimed at ensuring a more predictable exchange rate, improving energy efficiency, and reducing input costs for manufacturers will help restore business confidence. Furthermore, targeted support measures for low- and middle-income households—such as subsidies on essential goods, transportation, and power—can cushion the impact of inflation and sustain domestic demand.
By reinforcing economic stability and addressing the root causes of inflationary pressures, Nigeria can help restore purchasing power, support business growth, and create a more resilient foundation for long-term economic recovery. SOURCE: CSEA Africa
