Arthur Eriye

Despite the claims that Nigeria’s headline inflation rate decreased for the fifth month in a row,

Small businesses are struggling to survive with many of them decrying the country’s economic situation.

Small and Medium Enterprises (SMEs), which represent 96 per cent of businesses and are crucial for job creation, are still grappling with high input costs, weak consumer demand, and diminishing profit margins.

Experts believe that unless the government addresses structural issues such as insecurity, inadequate infrastructure, logistical inefficiencies, and unreliable power supply, the disparity between statistical improvements and the reality of daily survival will endure.

Currently, while inflation may appear to be decreasing on paper, for businesses and families throughout Nigeria, the struggle for survival remains a formidable challenge.

For instance, the leader of the Association of Small Business Owners of Nigeria (ASBO) stated that although decreasing inflation appears beneficial in theory, it has minimal impact on daily living conditions.

He called on the government to provide support to businesses and households through social safety nets, improved access to food, and transportation assistance, cautioning that the MSME sector, which employs over 80 percent of the workforce, is at risk of collapse.

In a similar vein, the Director-General of the Nigerian Association of Small and Medium Enterprises stated that the inflation statistics do not accurately represent the market realities. “One could take N50,000 to the market and spend it all without acquiring everything,” he expressed with concern, highlighting that businesses are reducing their purchases of raw materials and investments as a result of low demand,” he said.

The Lagos Chamber of Commerce and Industry emphasised that a decrease in inflation does not equate to a decrease in prices. Its president clarified, “Prices will only decrease when there is a substantial increase in supply.”

Additionally, leaders of small-scale industrialists noted that once prices increase, they seldom decrease, as producers tend to maintain their profit margins unless compelled to reduce them by competition.

Experts described the decline as promising but warned that the government must directly address food prices and insecurity to effect meaningful change.

Economic analysts concurred that although disinflation indicates macroeconomic stability, it does not alleviate the financial pressure on households.

Analysts observed a decline in demand, an improvement in foreign reserves, and a strengthening of the naira; however, structural challenges such as power shortages, elevated logistics costs, and reliance on imports continue to exert significant pressure on prices.

They emphasised that inflation statistics should be interpreted as aggregates, where some prices decrease while others remain rigid. Seasonal trends also affect the data: food prices tend to rise before harvest and decrease afterward, yet they often remain higher than the previous year’s levels.

The inflation report was released just days prior to the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting scheduled for September 22–23. Although the five-month trend of easing provides some leeway for adjustments, ongoing food and core inflation may compel the CBN to keep its benchmark interest rate at 27.5 percent.

Nigeria’s inflation rate continues to be one of the highest in Africa, despite recent signs of moderation. While these figures may provide a glimmer of hope for policymakers, the actual experience for millions of households and small enterprises is markedly different.

The National Bureau of Statistics (NBS) characterized this trend as indicative of slowing price growth; however, households, small enterprises, and leaders in the private sector argue that this reduction has not resulted in any relief for them.

According to NBS Consumer Price Index, inflation has decreased by 1.76 percentage points on a month-to-month basis, significantly falling from the 32.15 percent noted in August 2024. The Consumer Price Index increased marginally to 126.8 points in August, up from 125.9 in July, while the month-on-month inflation rate stood at 0.74 percent, a reduction from 1.99 percent in July.

Urban inflation decreased to 19.75 percent in August, down from 34.58 percent a year prior, whereas rural inflation was higher at 20.28 percent compared to 29.95 percent in August 2024. On a month-to-month basis, urban inflation reduced to 0.49 percent, while rural inflation recorded 1.38 percent. Analysts observed that rural regions continue to be more susceptible due to factors such as insecurity, elevated transportation costs, and disruptions in the supply chain.

Food inflation, which is the primary contributor to Nigeria’s inflation index, has also decreased to 21.87 percent in August, down from 37.52 percent a year earlier. On a month-to-month basis, it fell to 1.65 percent from 3.12 percent in July, with decreasing prices of rice, maize flour, millet, semolina, and soya milk playing a role in this reduction. Nevertheless, food prices continue to be high, especially in northern states facing challenges related to insecurity and inadequate logistics.

Core inflation, which excludes fluctuating food and energy prices, decreased year-on-year to 20.33 percent from 27.58 percent in August 2024. However, on a monthly basis, it increased to 1.43 percent from 0.97 percent, indicating pressure from housing, energy, transportation, education, and healthcare.

Throughout the states, there were significant disparities. Ekiti experienced the highest headline inflation rate at 28.17 percent, with Kano following closely at 27.27 percent. Conversely, Zamfara reported the lowest rate at 11.82 percent. In terms of food inflation, Borno topped the list at 36.67 percent, whereas Zamfara noted the lowest figure at 3.30 percent.

In spite of the statistical deceleration, numerous Nigerians report that they do not perceive the effects. Leaders of small business associations emphasized that the improving statistics hold little significance when the actual market conditions remain the same.

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