Nigeria’s inflation rate dropped to 24.48% in January following the rebasing of the Consumer Price Index (CPI), the National Bureau of Statistics (NBS) has disclosed, marking a sharp decline from the 34.80% recorded in December under the old CPI methodology.

However, this statistical drop does not mean that the prices of goods and services have fallen. Instead, it reflects a change in how inflation is measured, following an update to the reference year and the basket of goods and services used for calculations.

The rebasing of the CPI is part of the NBS’s broader initiative to update economic indicators. In January, the agency also announced plans to include illegal and hidden activities, such as drug trafficking and prostitution, in the calculation of Nigeria’s Gross Domestic Product (GDP). This move sparked widespread criticism, with many viewing it as an attempt to mask the government’s economic failings.

The controversy follows a similar rebasing of the unemployment rate last year, which resulted in Nigeria’s jobless rate dropping to around 4%—a figure widely dismissed as unrealistic given the country’s economic struggles. Economists warn that while these adjustments might make Nigeria’s economic indicators appear better on paper, they risk distorting reality, misleading policymakers, and deterring investors.

Understanding the CPI Rebasing

CPI rebasing involves changing the base year for price comparisons, ensuring that inflation calculations reflect current consumer spending patterns. It also updates the basket of goods and services used to measure inflation, replacing outdated items with those that better represent present-day consumption.

Previously, Nigeria’s CPI was calculated using 2009 as the base year. With the rebasing, 2024 is now the reference year, meaning inflation is measured against more recent price levels rather than those from over a decade ago. The NBS claims this adjustment makes inflation figures more representative of Nigeria’s economic realities.

According to the rebased CPI, food inflation stood at 26.08% year-on-year in January, a significant drop from 39.84% in December under the old methodology. Core inflation, which excludes volatile agricultural products and energy prices, fell to 22.59% from 29.28%.

Urban inflation under the rebased CPI was recorded at 26.09% in January, compared to 37.29% in December. Similarly, rural inflation dropped to 22.15% from 32.47%.

Inflation Drop Raises Skepticism

Despite these lower inflation figures, Nigerians continue to grapple with the high costs of essential goods and services. The NBS itself admitted that the decline does not mean that prices have actually dropped. Instead, the major factor behind the statistical decrease is the new base year being closer to the current period.

“The decline in the rebased inflation does not mean the general price level is falling,” the agency stated. “The major factor responsible for the decline was the base year being closer to the current period.”

Many Nigerians and economic analysts have criticized the move, arguing that the NBS is simply using statistical adjustments to downplay the severity of inflation. Economist Kalu Aja noted the irony of the situation, pointing out that while inflation has suddenly dropped by 10%, real-life conditions remain unchanged.

“Just like that, inflation drops by 10%. The same way unemployment dropped to 4%. Keep in mind prices have not fallen; the NBS has simply ‘rebased’ what it counts to measure CPI that measures inflation,” he said.

Aja further suggested that if inflation has truly dropped, the Central Bank of Nigeria (CBN) should respond by lowering the Monetary Policy Rate (MPR), which dictates bank lending rates. “Since inflation is down, the CBN should reduce the MPR rates so bank lending rates fall,” he added.

Concerns Over GDP Rebasing and Inclusion of Illegal Activities

Beyond inflation, the NBS’s announcement that Nigeria’s GDP calculation will now include illegal activities such as drug trafficking and prostitution has sparked major concerns. The agency claims this move aligns with international standards, as some developed nations also account for shadow economy activities in their GDP measurements.

However, many view this as an attempt to artificially inflate Nigeria’s GDP figures, making the economy appear stronger than it really is. Critics argue that this will only erode trust in the country’s economic data.

Nigeria had previously rebased its GDP in 2014, leading to an overnight expansion that made it Africa’s largest economy at the time. However, the country has since struggled with economic stagnation, currency depreciation, and declining foreign investment. Economists worry that the inclusion of illegal activities in GDP calculations could further undermine investor confidence and distort policy decisions.

The rebasing of the unemployment rate to around 4% had already drawn sharp criticism, as it conflicted with widespread job losses and economic hardship. By adopting similar adjustments to inflation and GDP, the NBS risks creating an economic narrative that is disconnected from the experiences of everyday Nigerians.

Nevertheless, the Statistician-General of the Federation (SGF)/Chief Executive of the NBS, Adeyemi Adeniran, said contrary to speculations, the exercise was not meant to suit the “expectations of anyone or entity, but simply to measure accurately in line with the global standards and practice.”

What a country: “Nigeria’s inflation rate has dropped to 24.48% in January 2025 from 34.80% in December 2024, following the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS). This rebasing involved updating the methodologies and changing the base year to 2024”.

Smart playbook because when you are on the floor, the variance is muted. Yes, by changing the base year to 2024, you can make inflation appear low since 2024 was already inflated. But if you had used say 2022 when it was largely marginal, inflation would have remained high when compared with Jan 2025 data.

Good People, no one eats statistics but statistics does influence monetary policies as promulgated by the Central Bank of Nigeria. Provided the apex bank does not become complacent that it has solved inflation, the new number may not be a big deal, but if we see it the way we are seeing the unemployment rate in Nigeria where the employment rate is so good that it embarrasses you for quoting it!

In other words, people have jobs in Nigeria that the governments at all levels do not need to worry about job creation or invest in innovation to boost employment. As of October 2024, the unemployment rate in Nasarawa State, Nigeria was 0.5%, the lowest in the country.  At the national level unemployment rate data, the World Bank recorded 35% for Nigeria, but Nigeria recorded 3.07% for itself.  That number was better than unemployment rates in Canada, UK, USA and many other economies.

I am hoping we do not prematurely celebrate data points as most governors are now doing, reminding everyone how they took down unemployment from 35% to 1% within 18 months! 

In this age of rebasing methodologies, what do you think NBS will provide as Nigeria’s new GDP? I expect them to push it from the current number of $300 billion to around $700-800 billion. GDP rebasing loading…expect something interesting.

==From Twitter NBS Publication

The National Bureau of Statistics has released the rebased Consumer Price Index (CPI), reflecting an updated price reference period (base year) of 2024 and weight reference period of 2023. 

Nigeria’s inflation rate for January 2024 stood  at 24.48% year on year. 

• Food Inflation rate stood at 26.08%
• Core Inflation rate stood at 22.59%
• Urban Inflation rate stood at 26.09%
• Rural Inflation rate stood at 22.15%

Special indices introduced and their inflation rates. (Base Period: 2024 = 100)

• Farm Produce – 10.50%
• All items less farm produce- 10.70%
• Energy index  – 8.9%
• Services Index – 10.41%
• Imported food index – 11.47%

Note: the rates reported for the new indices are for January 2025 compared to the base year.