Lagos, Nigeria – Nigerian businesses are being urged to prepare for a challenging year ahead, with inflation continuing to surge and placing significant pressure on operations. The Lagos Chamber of Commerce and Industry (LCCI) warned in a statement on December 16th that the country’s inflation rate, which hit a 28-year high of 34.60% in November 2024, is creating a tense business environment, with high prices constraining growth and operations across sectors.
Chinyere Almona, Director-General of the LCCI, emphasized that the persistent rise in inflation, coupled with the Central Bank’s unsuccessful attempts to reduce the currency in circulation, is set to make the business landscape even more difficult in 2025. With the holiday season approaching and high spending patterns typically seen during this period, businesses are expected to face further challenges from escalating interest rates.
“Given the ongoing inflationary pressures and the Central Bank’s policy struggles, we anticipate even higher interest rates in the coming year,” Almona said. “This, combined with the country’s current macroeconomic challenges, suggests a tough 2025 for Nigerian businesses.”
Impact of High Inflation
The LCCI’s note highlighted that the current inflation rate has far-reaching consequences for both businesses and consumers. One of the most significant effects is reduced consumer spending. High food prices and core inflation are eroding disposable income, which in turn reduces demand for non-essential goods and services.
“Businesses are facing increased costs in transportation, rent, and energy, all of which elevate production expenses and shrink profit margins,” Almona explained. “The rising cost of doing business is exacerbating the already difficult economic climate, forcing many companies to reassess their operations and cost structures.”
Worsening Economic Environment
The LCCI also pointed out that the macroeconomic environment is undermining investor confidence. As Nigeria continues to grapple with inflation, the country’s multidimensional poverty rate, which affects 133 million Nigerians, further threatens economic growth. The high inflation rate is making domestic industries less competitive, stifling business expansion and deterring both local and foreign investment.
“Inflation at 34.60% in a country with such a high poverty rate weakens our industries and makes it harder for businesses to compete on the global stage,” Almona noted. “The uncertain economic environment is deterring investments, which are crucial for the country’s growth.”
Despite the grim outlook, Almona expressed some optimism about ongoing reform measures designed to boost production and support the economy. “While the impact of interest rates on curbing inflation may be weak, we see hope in the government’s reform measures to increase production. These reforms, if fully implemented, could yield better results in tackling inflation, interest rates, and exchange rate issues in the long term,” she added.
Calls for Strategic Action
In addition to policy reforms, the LCCI has called for a more coordinated effort to boost oil production as a way to earn more foreign exchange (FX) and support the weakening naira. The country’s oil revenue plays a crucial role in defending the naira and supporting its foreign exchange reserves.
Almona also addressed the issue of insecurity, which continues to hamper business operations and investments in various regions of the country. She suggested that Nigeria must adopt advanced intelligence and surveillance technologies to enhance multi-level policing and address security challenges more effectively. “Worsening insecurity is adding to the pressure businesses are already facing. Improved security infrastructure is essential for ensuring a conducive environment for economic activities,” she said.
Inflation Drivers
The soaring inflation is being driven primarily by rising food prices, escalating energy costs, and widespread price pressures across several sectors, including housing, transportation, and personal services. As businesses struggle to cope with these challenges, there is increasing concern that the cost of living will continue to outpace income growth, affecting the broader economy.
“Businesses and consumers alike are feeling the effects of rising energy costs, soaring food prices, and inflationary pressures across various sectors,” Almona said. “The combination of these factors is creating a perfect storm for businesses, and it’s vital that all stakeholders work together to navigate this difficult period.”
Looking Ahead
As Nigeria heads into 2025, the outlook for businesses remains uncertain, with inflation and high interest rates continuing to pose significant challenges. However, with strategic reforms, improved security, and better management of the country’s oil resources, there is hope for stabilizing the economy and fostering a more favorable business environment in the long run.
The LCCI’s message is clear: businesses must prepare for a tough year ahead, but with careful planning and adaptation to the changing economic landscape, they can weather the storm.
