By: Oluwaseye Ogunsanya
The National Bureau of Statistics (NBS) last Tuesday, announced a significant drop in Nigeria’s inflation rate, which decreased from 34.8% in December 2024 to 24.48% in January 2025. This adjustment followed the rebasing of the Consumer Price Index (CPI), a process aimed at better reflecting current economic realities.
NBS said: “The rebased All Items index in January 2025 was 110.68, while the headline inflation rate on a year-on-year basis stood at 24.48 per cent in January 2025.
“This means that the general prices of goods and services in Nigeria increased by 24.48 per cent compared to January 2024,” the statement said.
But what exactly does this mean for ordinary Nigerians?
What is CPI Rebasing?
The Consumer Price Index (CPI) is a vital economic indicator that measures the average change over time in the prices paid by consumers for goods and services. Rebasing the CPI involves updating the reference year used to calculate this index, which allows for a more accurate reflection of contemporary consumption patterns and economic conditions.
The Statistician General of the Federation and Chief Executive Officer (CEO) of the NBS, Adeyemi Adeniran, had in October 2024, announced plans to rebase the Gross Domestic Product (GDP) and Consumer Price Index (CPI) to reflect current realities and account for structural changes in the economy.
The agency said the rebased CPI produces estimates reflect the current inflationary pressure and consumption pattern of people living in Nigeria.
Key Changes in the Rebasing Process
The National Bureau of Statistics (NBS) implemented several key updates during the rebasing of the Consumer Price Index (CPI). Firstly, the reference year was changed from 2009 to 2024, meaning that current prices are now compared against a more recent set of data. This adjustment enhances the index’s relevance to today’s economic environment.
Additionally, the CPI basket was expanded from 740 to 960 items. This broader range better captures the variety of goods and services that Nigerians actually purchase, including essential categories such as food, clothing, transportation, and housing.
To further improve accuracy and efficiency, the NBS introduced digitized methods for collecting price data. These advancements enhance the reliability of CPI calculations. Finally, alongside the standard CPI, the NBS has introduced new special indices, such as the Farm Produce Index and the Energy Index, which will provide more detailed data for policymakers. Together, these changes contribute to a more accurate and comprehensive understanding of inflation in Nigeria.
The Resulting Drop in Inflation
The rebasing of the Consumer Price Index (CPI) resulted in a reported inflation rate of 24.48%, marking a significant decrease compared to the previous month. This substantial change can be attributed to several key factors.
Firstly, methodological adjustments played a crucial role, as the new methodology reflects shifts in consumer behavior and economic conditions, making the CPI more representative of current realities. Additionally, the food inflation rate experienced a notable decline, dropping from 39.84% to 26.08%. This suggests that while food prices are still on the rise, the rate of increase has slowed considerably. Furthermore, core inflation, which excludes volatile items such as food and energy, also saw a decrease, falling from 29.28% to 22.59%. These changes collectively contribute to a more accurate understanding of inflation in Nigeria.
What Does This Mean for Ordinary Nigerians?
The recent drop in inflation may create a perception of economic relief, but it’s important to recognize that this does not necessarily mean lower prices in the market. Many Nigerians still face high costs for essential goods and services. Although the new Consumer Price Index (CPI) figures suggest a more favorable economic environment, the reality for many households may not change significantly, as underlying pressures—especially in food and energy prices—continue to pose challenges.
Reacting to the development, the Lagos Chamber of Commerce and Industry (LCCI), explained that rebasing typically updated the weight of different goods and services in the inflation basket to better reflect current consumption patterns.
A statement by Director General of LCCI, Dr. Chinyere Almona, said the drop in inflation was because of a change in measurement rather than real decline in prices.
“The previous method likely overemphasised food inflation, while the new approach incorporates updated economic data and adjusted weightings.
“This difference does not indicate a sharp fall in prices but a revised way of calculating inflation. Despite the lower reported rate, inflation remains high, meaning prices are still rising, just at a slower pace.” Almona stated.
She also added that a lower inflation rate seemed positive, but it did not automatically improve living standards. According to her, “Prices are still rising, wages remain stagnant, and unemployment is high, keeping real incomes under pressure.
“The rebased inflation rate only reflects a different measurement, not an actual drop in prices.
“For most Nigerians, essential costs, like food and transportation, remain high, meaning living conditions will not improve unless there is a real reduction in the cost of necessities.”
Moreover, the updated CPI will equip the government and policymakers with improved data to make informed decisions regarding monetary policy. For instance, the Central Bank of Nigeria (CBN) may contemplate adjusting interest rates based on these new inflation figures, which could impact borrowing costs and economic growth.
Additionally, a more accurate CPI can help reassure investors about Nigeria’s economic climate. This reassurance may lead to increased foreign investment and enhanced economic growth prospects, ultimately benefiting everyday Nigerians through job creation and better services.
Finally, it is essential for Nigerians to understand that the rebased CPI figures are not just a statistical update; they reflect real changes in how prices are measured and can significantly influence economic policy that affects daily life.
Conclusion
The rebasing of Nigeria’s Consumer Price Index and the resultant drop in inflation rate is a significant development in the country’s economic landscape. While it provides a more accurate picture of price changes, ordinary Nigerians must remain aware that the challenges of high living costs persist. As the government uses these new indices to inform policy decisions, it is essential for citizens to stay informed and engaged in economic discussions that impact their lives. Understanding these changes can empower Nigerians to navigate the complexities of the economy more effectively.
