Nigeria’s business landscape is marked by innovation, resilience, and an unyielding entrepreneurial spirit. Despite economic headwinds, businesses in the country have continually adapted to new challenges, finding ways to remain competitive and sustain growth. Inflation, while posing significant hurdles, also presents opportunities for businesses to rethink strategies, optimize operations, and unlock new revenue streams. By embracing agility and forward-thinking solutions, Nigerian enterprises can not only navigate inflation but also thrive in it.
Inflation in Nigeria is driven by multiple factors, including currency depreciation, supply chain disruptions, high import dependency, and rising energy costs. The continuous devaluation of the naira makes imports more expensive, driving up the cost of raw materials, goods, and services. The heavy reliance on petroleum products, coupled with fluctuating global oil prices, also contributes to inflationary pressures, particularly in transportation and logistics.
Food and transportation inflation, in particular, have hit businesses hard, affecting both operational costs and consumer demand. The increased cost of transporting goods leads to higher retail prices, reducing the purchasing power of consumers and forcing businesses to adjust their pricing models. The ripple effect extends to virtually every sector, from manufacturing and retail to technology and financial services.
These inflationary pressures are further exacerbated by Nigeria’s fiscal deficits, supply-side constraints, and food insecurity. With the fiscal deficit standing at 4.5 percent of GDP—surpassing the 3% threshold recommended by the Fiscal Responsibility Act—government spending continues to outpace revenue, fueling inflation. At the same time, insecurity in farming regions has severely disrupted food supply chains, driving food inflation to alarming levels. The devaluation of the naira has also led to high import costs, compounding the strain on businesses and consumers alike.
While inflation presents significant hurdles, businesses that pivot and adapt can maintain their competitive edge through various strategies. One of such is agile pricing – a dynamic pricing strategy that embodies flexibility, responsiveness, and a keen understanding of market dynamics. Inflation forces businesses to rethink their pricing models.
Traditional cost-plus pricing may no longer be effective as rising costs erode profit margins. Instead, businesses must adopt dynamic pricing strategies that reflect real-time market conditions while remaining sensitive to customer affordability. Companies can also explore product bundling, value-based pricing, and tiered offerings to cater to different customer segments.
For example, offering discounts for bulk purchases or subscription-based models can enhance customer retention and create more predictable revenue streams. The key is to ensure pricing adjustments are strategic, not reactionary, to maintain customer trust and long-term loyalty.
Furthermore, Nigeria’s heavy reliance on imports exposes businesses to foreign exchange volatility and global supply chain disruptions. To mitigate these risks, companies must invest in local sourcing, backward integration, and supply chain diversification. Building relationships with local suppliers and manufacturers can reduce exposure to exchange rate fluctuations while fostering economic resilience.
Also, oil production remains a key factor influencing the naira’s stability. If crude oil production increases beyond OPEC quotas, it could stabilize the exchange rate, benefiting businesses reliant on imported raw materials. Businesses should also explore partnerships with local producers to ensure a steady supply of raw materials at more stable prices. Additionally, leveraging technology for supply chain transparency and efficiency—such as AI-driven demand forecasting and inventory optimization—can drive significant cost savings and improve operational agility.
A high-inflation environment necessitates operational efficiency. Companies must conduct regular cost audits, identifying areas for cost-cutting without compromising quality. Process automation, energy-efficient practices, and lean management can help businesses reduce overhead costs. For instance, digital transformation initiatives such as cloud computing, AI-driven analytics, and e-commerce solutions can optimize resource allocation and enhance productivity.
Businesses should also evaluate energy consumption, considering renewable energy sources or hybrid power solutions to minimize fuel costs. The shift to Compressed Natural Gas (CNG) for logistics, as recommended in energy transition plans, could also reduce fuel costs and improve efficiency in transport-dependent businesses.
Inflation may be an economic reality, but it does not have to be a death sentence for businesses. Nigerian companies that adopt agility, cost efficiency, and innovation can not only withstand the pressures of inflation but emerge stronger and more competitive.
By implementing strategic pricing, optimising supply chains, and embracing digital transformation, businesses can transform inflationary challenges into growth opportunities. Agusto & Co. underscores that the success of Nigeria’s economic policies centres on policy sequencing and consistency. If businesses align their strategies with macroeconomic realities and government policies, they can position themselves for sustained growth and profitability.
Forward-thinking businesses will not just survive inflation, they will turn it into a catalyst for long-term success.
Ogbobine is the head of consulting at Agusto Consulting Limited, bringing over 20 years of expertise in research, strategy, and consulting. He is a Fellow Chartered Accountant (FCA) and has delivered insights on topics such as geopolitical risks impacting the banking industry and strategies for navigating global uncertainties.
