Nigeria’s inflation shock hits tech, fintech, creative sectors as costs outpace growth

Nigeria’s high-cost economic environment is beginning to reshape its technology, fintech and creative industries, as rising energy and logistics expenses compress margins and weaken consumer demand, even as transaction volumes and corporate earnings show pockets of resilience.

For many urban workers earning about N900,000 monthly, rising petrol and food prices have erased savings buffers and forced a shift in spending priorities. As households move toward essential consumption, discretionary expenses, including digital services, are increasingly being reduced.

These themes were unpacked at the latest Lagos Business School Breakfast Session, where Bismarck Rewane, renowned economist and managing director of Financial Derivatives Company, examined the implications of global oil market shifts, geopolitical tensions, and domestic policy choices on Nigeria’s economy.

At the macro level, Nigeria’s Purchasing Managers’ Index slowed to 51.9 in March from stronger February levels, signalling that while the private sector remains in expansion mode, momentum is weakening. The underlying drivers are clear: new orders are softening as rising prices erode real incomes, while output growth is slowing as firms struggle with higher energy and logistics costs. This same pattern is now playing out across the digital economy.

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For instance, electronic fund transaction data reflects both resilience and fragility. Total transaction value rose from about N113.27 trillion in February to N120.96 trillion in March, a 6.79 percent increase driven largely by seasonal factors such as Ramadan, Easter spending and end-of-quarter settlements.

But beneath that growth, behaviour is shifting. Nigeria Inter-Bank Settlement System, NIBSS Instant Payment (NIP) transfers recorded only modest growth, while POS transactions declined, indicating that retail and discretionary spending are weakening even as essential financial flows remain stable. The rise in National Electronic Funds Transfer (NEFT) and cheque transactions further suggests that formal and larger-value transactions are holding up better than everyday consumer spending.

This divergence is critical for Nigeria’s fintech ecosystem. The country remains Africa’s dominant fintech hub, attracting 37 percent of the continent’s $108 billion investment in 2025. Platforms such as Moniepoint and OPay continue to process enormous daily volumes, about N1.2 trillion and N2.5 trillion respectively, reinforcing their role as core financial infrastructure.

Yet the structure of that activity is changing. With SMEs accounting for roughly 82 percent of acquiring payments, a 20 percent to 30 percent decline in demand within that segment implies fewer transactions, even if total values remain elevated. In effect, fintech is becoming a buffer for economic activity, but not immune to slowdown.

At the same time, the sector faces intensifying competition. Zero-fee banking, driven by both traditional banks and fintech platforms, is accelerating a shift toward a low-cost, high-volume model. Customers are migrating rapidly to cheaper platforms, forcing competitors to cut fees and compress margins.

While this supports financial inclusion and lowers transaction costs across the economy, it creates a structural profitability challenge. In a slowing economy where transaction growth is weakening, sustaining a zero-fee model becomes increasingly difficult, raising the risk of consolidation or strategic repositioning within the sector.

For telecom operators such as MTN Nigeria, the pressure is coming from both sides. The company recorded a sharp turnaround from a N400.44 billion loss to a N1.11 trillion profit, highlighting the resilience of telecoms as an inelastic service.

However, this recovery is fragile. Diesel costs for powering base stations have nearly doubled, significantly increasing operating expenses. While revenues are projected to grow by about 30 percent in 2026, costs are expected to rise even faster at around 40 percent, pointing to inevitable margin compression. This dynamic mirrors the broader economy: strong top-line growth is no longer enough when cost pressures are accelerating.

Nowhere is the pressure more visible than in the creative sector, where discretionary spending is the primary revenue driver. Case studies presented at the session highlight the severity of the adjustment.

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For Funke Akindele, blockbuster film production costs have doubled from about N250 million to N500 million, while marketing expenses have risen by 40 percent. Although ticket prices have increased by roughly 42 percent, cinema attendance has dropped by 55 percent, leading to a 52 percent decline in box office revenue.

This gap between rising costs and falling demand illustrates a classic case of margin compression. Even significant price increases cannot offset the volume decline, meaning total revenue falls despite higher ticket prices.

For Davido, the pattern is similar but with an important digital twist. Concert ticket prices have risen by about 40 percent, yet attendance has fallen by 50 percent, reflecting reduced consumer willingness to spend on live entertainment.

However, digital metrics tell a different story. YouTube subscribers have grown by 62 percent, while Spotify listenership has increased by 63 percent. This divergence highlights a structural shift, in that, as physical attendance declines due to cost pressures, audiences are migrating toward lower-cost digital consumption channels.

This transition underscores the growing importance of streaming and digital distribution within Nigeria’s creative economy. The strong growth in digital metrics clearly indicates that online platforms are absorbing demand displaced from physical events. In economic terms, digital consumption is acting as a substitute good, offering affordability and accessibility in a high-inflation environment.

The 45-day outlook suggests further cuts in discretionary spending, with artists and producers already reducing marketing budgets, renegotiating contracts and scaling back operations. Over a 90-day horizon, modest growth of three percent to four percent is expected, driven largely by digital channels rather than physical events. This points to a reconfiguration of the industry, where capital-intensive concerts and cinema releases give way to more scalable, lower-cost digital formats.

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Across financial markets, the implications are becoming clearer. With cost growth outpacing revenue expansion across multiple sectors, corporate earnings are expected to come under pressure in 2026. This is already driving a reassessment of equity valuations, with many stocks likely to move from buy to hold as investors factor in weaker margin outlooks. The Nigerian stock market, after a strong rally, is expected to give back some of its earlier gains as this reality becomes more visible in earnings reports.

The broader macroeconomic outlook reinforces this cautious stance. The naira is projected to trade between N1,450 and N1,475 in the parallel market, while Brent crude stabilises around $95 per barrel. Government revenues will benefit from higher oil prices, leading to increased spending in the coming months. However, this creates a divergence between public sector strength and private sector weakness, with households and businesses continuing to bear the brunt of inflation.

Bismarck Rewane’s central thesis is that Nigeria is navigating a period of resilient strain. The economy is not in crisis, but it is under pressure from cost-push inflation that is reshaping behaviour across sectors. Fintech and digital payments remain key growth engines, while telecoms and other inelastic sectors provide stability. However, margin compression is becoming widespread, and discretionary industries such as entertainment are facing the sharpest adjustments.

The challenge ahead is to prevent this temporary cost shock from becoming a prolonged drag on growth. If energy prices stabilise and policy measures support productivity, the economy could regain momentum. But for now, Nigeria’s tech, fintech and creative sectors are being forced to adapt to a new reality, one where efficiency, scale and digital innovation determine survival in an increasingly constrained economic environment.