Nigeria’s inflation rate declines following an update and revamp of its statistics

After Nigeria’s price index was rebased for the first time in over ten years, the statistics agency said on Tuesday that the country’s annual inflation rate for January was 24.48%, a significant decrease from the previous month’s number.

The rebasing, which involved updating the comparison period from 2009 to 2024 and reweighting the goods in the reference “basket” used to compute inflation, was deemed essential by the National Bureau of Statistics to account for shifts in consumption patterns.

“The price estimate from NBS will be much more reflective of the current inflationary pressure experienced within the economy,” Prince Adeyemi Adeniran, the Statistician-General, stated during a news conference.

According to him, the most recent figures shouldn’t be seen as evidence of a significant reduction in inflation. Prior to the rebasing, the statistics office reported December inflation to be 34.80% annually last month.

“It’s not saying prices have come down in the market to this rate, but the rate of change between 2024 January and 2025 January is what the inflation rate is all about,” Adeniran stated.

In Nigeria, the Consumer Price Index has not been rebased every five years since 2009 because of few resources.

According to Adeniran, the World Bank, the International Monetary Fund, and the Central Bank of Nigeria contributed data and technical assistance to the most recent rebasing.

However, financial markets had not anticipated that the rebasing would have such a significant impact on the headline inflation rate, according to Razia Khan, Standard Chartered’s senior economist for Africa and the Middle East.

According to her, the central bank’s monetary policy meeting this week may see an interest rate drop as a result of January’s lower figure.

Last year, the bank increased interest rates by 875 basis points because President Bola Tinubu’s actions to reduce subsidies and weaken the naira currency increased inflation. The administration of Tinubu thinks that the changes would strengthen public finances and spur economic expansion.

A 25 basis point rate drop this week, according to Khan, would at least “acknowledge local sentiment that policy has been too tight” but would have little effect on the market.

A major contributor to the headline rate, food inflation opened a new tab in January following the rebasing and was 26.08% year over year (NGFINF=ECI).