In a significant economic development, Nigeria’s annual inflation rate has decreased to 24.48% in January 2025, down from 34.80% in December 2024. This notable decline is primarily attributed to the National Bureau of Statistics (NBS) rebasing the Consumer Price Index (CPI) to better reflect current consumption patterns and economic realities.
Understanding the CPI Rebasing
The rebasing of the CPI involves updating the base year and the basket of goods and services used to measure inflation. Prior to this adjustment, the base year was 2009. The NBS has now updated the base year to 2024, incorporating significant changes in household consumption patterns over the past 15 years. This update ensures that the CPI more accurately represents present-day spending habits and price fluctuations.
According to Statistician-General Prince Adeyemi Adeniran, this rebasing exercise is vital for providing a more accurate depiction of current inflationary pressures. The updated CPI now includes a broader range of items, expanding from the previous 740 to 960 goods and services. This expansion reflects the evolving consumption patterns of Nigerians, offering a more comprehensive snapshot of the economy.
Impact on Inflation Figures
The immediate effect of the CPI rebasing is a recalibration of the inflation rate. In December 2024, using the old base year, the inflation rate stood at 34.80%. Post-rebasing, the inflation rate for January 2025 is reported at 24.48%. It’s important to note that this reduction does not necessarily indicate a sudden drop in prices but rather a more accurate measurement based on updated data and consumption trends.
Food inflation, a significant component of the overall rate, was recorded at 26.08% year-on-year in January 2025. This figure highlights the persistent challenges in the food sector, which continues to experience price volatility due to various factors, including supply chain disruptions and policy changes.
Economic Policy Implications
The rebasing of the CPI comes at a time when Nigeria is undergoing substantial economic reforms. President Bola Tinubu’s administration has implemented policies such as the removal of fuel subsidies and the devaluation of the naira to improve public finances and stimulate economic growth. These measures, while aimed at long-term benefits, have contributed to short-term inflationary pressures.
In response to rising inflation, the Central Bank of Nigeria (CBN) increased interest rates by 875 basis points in the previous year. With the rebased CPI now providing a clearer picture of the inflation landscape, the CBN is poised to hold its first rate-setting meeting of 2025. Policymakers will need to consider the updated inflation data when making decisions on monetary policy to balance controlling inflation with supporting economic growth.
Looking Ahead
The rebasing of Nigeria’s CPI is a crucial step toward enhancing the accuracy of economic indicators, which in turn informs better policy decisions and planning. By aligning the CPI with current consumption patterns, the NBS provides a more reliable tool for assessing the cost of living and inflationary trends.
As Nigeria continues to navigate its economic reforms, the updated CPI will serve as a vital benchmark for measuring the effectiveness of policy interventions and their impact on the populace. Stakeholders, including businesses, investors, and consumers, will benefit from the improved clarity and relevance of the rebased inflation data.
In conclusion, while the rebasing of the CPI has resulted in a lower reported inflation rate, it reflects a methodological update rather than an immediate change in market prices. Continuous monitoring and adaptive policy measures will be essential to address the underlying factors influencing inflation and to promote sustainable economic stability in Nigeria.
