Financial and economic analysts expect the Monetary Policy Committee of the Central Bank of Nigeria to reduce the benchmark interest rates following the drop in the inflation rate released by the National Bureau of Statistics on Tuesday.
The experts also called for a rejig of the country’s economic policies to meet the masses’ yearnings, stressing that though the new inflation rate is lower than the previous figure, the prices of commodities are still very high.
The NBS on Tuesday declared that Nigeria’s headline inflation dropped to 24.48 per cent in January 2025 following the rebasing of the Consumer Price Index. This represents a significant decline from the 34.80 per cent recorded in December 2024.
The Statistician-General of the Federation, Prince Adeyemi Adeniran, disclosed this at the unveiling of the rebased CPI report in Abuja.
He said, “The All-Items Index, which is used to measure headline inflation for January 2025, was 110.7, resulting in a headline inflation rate of 24.48 per cent on a year-on-year basis. This increase was mainly driven by Food and Non-Alcoholic Beverages, Restaurants and Accommodation Services and Transport.”
He explained that the rebasing exercise was necessary to ensure a more accurate reflection of inflationary pressures in the country.
Adeniran said the CPI rebasing involved shifting the base year from 2009 to 2024 to better capture changes in consumption patterns, pricing, and household expenditures.
He noted that Nigeria had not rebased its CPI in over a decade, even though the exercise is typically conducted every five years to reflect economic realities.
With the rebasing, the methodology for computing inflation has been refined, including the adoption of the Classification of Individual Consumption According to Purpose 2018 version, which improves the categorisation of household expenses.
The Statistician-General also highlighted the exclusion of own-production, imputed rents, and gifted items from the inflation calculations to ensure the CPI only measures actual monetary expenditures.
Food inflation for January 2025 stood at 26.08 per cent year-on-year, showing a notable decline from 39.84 per cent in December 2024. Adeniran attributed the inflationary trend to food, beverages, clothing, and footwear, which were the major contributors to price movements during the period.
Further analysis by the NBS showed that Urban Inflation was 26.09 per cent, while Rural Inflation stood at 22.15 per cent. Core Inflation, which excludes farm produce and energy, was 22.59 per cent in January 2025.
The rebased CPI also introduced new special indices to enhance inflation tracking, including a Farm Produce Index of 10.50 per cent, Energy Index of 8.9 per cent, Services Index of 10.41 per cent, Goods Index of 10.79 per cent, and Imported Food Index of 11.47 per cent.
Adeniran said the rebasing exercise involved consultations with key stakeholders, including the Central Bank of Nigeria, International Monetary Fund, World Bank, United Nations Economic Commission for Africa, BudgiT, and the Nigerian Economic Summit Group.
The Statistician-General urged journalists and analysts to report the rebasing results accurately to avoid misinterpretation, emphasising that the changes were not a manipulation of inflation figures but an effort to present a more realistic measure of price levels.
Adeniran assured that the new CPI methodology would improve the credibility of Nigeria’s inflation data, making it more reflective of current economic conditions and aligned with global best practices.
MPR should drop
Reacting to the rebased CPI by the bureau, analysts said they would be expecting the Monetary Policy Committee of the Central Bank of Nigeria to consider a dip in the Monetary Policy Rate (benchmark interest rates).
Speaking on the development, Professor of Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, welcomed the rebasing on the country’s inflation rate but expressed hope that it would affect the interest rates.
He said, “The rebasing exercise is primarily meant to reflect current inflationary pressure which explains why the NBS has moved the reference price period to 2024. Against this backdrop, the development is welcome.
“The benefits of the rebased number are several. First, it will help the government, especially the monetary authority, to make more informed decisions. It makes our inflation number comparable with the rest of the world since it is based on standard and updated methodology. This can place both foreign and domestic investors in a stronger position to make investment decisions in favour of Nigeria.”
Echoing similar sentiments, the Managing Director of Arthur Stevens Asset Management, Tunde Amolegbe, noted that the rebasing is supposed to capture economic activity and the size of the economy as accurately as possible.
“What seems to have happened now is that while we still have significantly higher prices within the economy, the inflation figures have dropped because the denominator, which is the size of the economy itself, has changed. This is because it’s now larger than what was being used previously.
“In the case of food inflation, for instance, some products that were not captured previously have now been included. For me, any effort to accurately capture this activity is useful because of its impact on macroeconomic indexes, which also impact people’s lives.
“For instance, if inflation is now at 24 per cent rather than 34 per cent, that could give an impetus to the MPC to consider gradually lowering interest rates. This will have a real-life impact. Now that the inflation number for January has provided evidence of weakening inflationary pressure, I expect the Monetary Policy Committee of the CBN to pause rate hikes to create room for output growth,” he asserted.
CPPE surprised
The Director of the Centre for Promotion of Private Enterprise, Dr Muda Yusuf said it was unsurprising to see the January 2025 inflation rate dropping from the December 2024 figures after the rebasing of the Consumer Price Index.
Yusuf observed that the high inflation rates in 2024 resulted in a “strong base effect” and festive transactions by Nigerians in December 2024 dropped in the new year leading to a deceleration in inflation rates.
He explained: “The sharp deceleration of the headline inflation rate from 34.8 per cent in December 2024, to 24.48 per cent in January 2025, the drop in food inflation from 39.8 per cent to 26.08 per cent and the decline in core inflation from 29.28 per cent to 22.59 per cent did not come as a surprise given the review of the computation base year from 2009 to 2024.
“There is additionally a strong base effect on the inflation figures given the high inflation regime in 2024, which had a considerable effect on the year-on-year inflation outcomes. Besides, transaction demand in December 2024 was typically much more intense because of the festivities while the spending momentum in January was predictably much slower because of lower disposable incomes following intense spending in the previous month.”
Yusuf urged caution when celebrating the inflation reduction, clarifying, “A drastic reduction in inflation figures is not tantamount to a reduction in price level; inflation reduction simply means a reduction in the rate of increase in the general price level.”
He added that the reality of high prices in the country has not changed and remains a major factor in the cost of doing business, the cost of living, and the poverty equation.
“Households and firms are still concerned about high energy costs, the strength of the naira, high interest rate, cost of imports, transportation costs and insecurity,” the economist submitted.
Yusuf projected that households would hope the Federal Government would address major cost drivers. They desire a reduction in the general price level from incredibly high levels in 2024 to a substantial moderation in 2025. He described this desired moderation as disinflation.
Reacting to the development, the National President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said while it was a standard practice to rebase the consumer price index over time, it sometimes does not reflect the macroeconomic realities of the economy.
He asserted, “Rebasing potent risks such as misleading economic signals, policy missteps, and public skepticism. A cautious approach, integrating clear communication strategies and robust stakeholder engagement, will be essential to ensuring that inflation data accurately reflects Nigeria’s economic trajectory.
“By navigating these complexities with foresight, Nigeria can leverage the rebased CPI as a tool for informed decision-making and sustainable economic growth.”
Also, the Director-General of the Lagos Chamber Of Commerce And Industry, Dr Chinyere Almona noted that a rebased CPI provides a “clearer view of the economy” which considering the drop of headline inflation from 34.8 per cent to 24.48 per cent “may seem positive but does not automatically improve living standards.”
Almona explained that the rebased CPI did not mean any price decline but an update in the weight of different goods and services in the inflation basket to better reflect current consumption patterns.
“The previous method likely overemphasised food inflation, while the new approach incorporates updated economic data and adjusted weightings,” she noted. “This difference does not indicate a sharp fall in prices but a revised way of calculating inflation.”
LCCI’s DG added that inflation remains high despite the decreased inflation rate, meaning prices are still rising but at a slower pace.
“Prices are still rising, wages remain stagnant, and unemployment is high, keeping real incomes under pressure,” Almona submitted. “The rebased inflation rate only reflects a different measurement, not an actual drop in prices.”
She observed that most Nigerians’ living conditions will not improve unless there is a real reduction in essential costs like food and transportation, which remain high.
LCCI’s DG urged the government to implement targeted interventions to address inflationary pressures and improve economic stability, notin,g “One key priority is tackling food inflation, which accounts for over 50 per cent of price increases.
“Policies should focus on boosting agricultural productivity, reducing post-harvest losses, and improving transportation and storage infrastructure to ensure food affordability.”
She urged the Federal Government to stabilise the exchange rate, encourage local production and reduce reliance on imports to help strengthen the currency and control price surges, maintain fiscal discipline, and prioritise infrastructure and social investments which help manage inflationary pressures.
Almona called on the Central Bank of Nigeria to “carefully adjust monetary policies, ensuring interest rate decisions strike a balance between controlling inflation and sustaining economic growth.”