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The National Bureau of Statistics (NBS) has announced a January 2025 inflation rate of 24.48% year-on-year, following the rebasing of the Consumer Price Index (CPI). The Statistician General of the Federation, Prince Adeyemi Adeniran, revealed this during the official launch of the rebased CPI report in Abuja.
Key Drivers of Inflation
According to Adeniran, the All-Items Index, which measures headline inflation, stood at 110.7 in January 2025, with the inflation increase primarily driven by Food and Non-Alcoholic Beverages, Restaurants and Accommodation Services, and Transport.
The rebasing process introduced significant methodological changes, including the removal of own-production, rents, and gifted items, ensuring a more accurate reflection of Nigeria’s current consumption patterns. Additionally, household expenditure on Insurance and Financial Services is now factored into total household spending, holding a 0.5% weight in the new CPI calculation.
“The rebasing has brought the base year closer to the current economic reality, shifting it from 2009 to 2024. This adjustment enhances the accuracy of inflation estimates and provides a better reflection of price movements in the economy,” Adeniran explained.
Clarification on Inflation Interpretation
Adeniran stressed that the revised inflation rate does not indicate a sudden drop in market prices, but rather reflects a change in the calculation methodology. He pointed out that the previous December 2024 inflation rate of 34.80% was based on the old CPI model, whereas the rebased figures align with updated global standards.
“This does not mean that prices have drastically decreased. Instead, it signifies that the rate of price increase between January 2024 and January 2025 has slowed,” he noted.
The rebasing of the Consumer Price Index (CPI), which is supposed to occur every five years, had not been conducted in Nigeria since 2009 due to resource constraints. The latest revision received technical and data support from the World Bank, the International Monetary Fund (IMF), and the Central Bank of Nigeria (CBN).
Market Reactions and Economic Implications
Financial analysts have weighed in on the impact of the rebased CPI. Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, noted that the revised inflation figures could potentially influence monetary policy decisions, including a possible interest rate cut at the CBN’s upcoming policy meeting.
In 2024, the CBN raised interest rates by 875 basis points as inflation surged, driven by President Bola Tinubu’s economic reforms, including the removal of fuel subsidies and naira devaluation. These policies were intended to stabilize public finances and promote economic growth.
Concerns Over Inflationary Trends
Reacting to the new inflation data, Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise, emphasized the need for caution in interpreting the figures.
“The sharp drop in headline inflation from 34.8% in December 2024 to 24.48% in January 2025, alongside declines in food and core inflation, is largely due to the change in computation methodology. Additionally, seasonal factors, such as lower post-festive spending in January, have contributed to the decline,” Yusuf explained.
He further noted that while inflation figures show a deceleration, this does not equate to a reduction in overall price levels. Businesses and households continue to struggle with high energy costs, exchange rate volatility, high interest rates, import costs, transportation expenses, and insecurity.
“What Nigerians truly need is a substantial reduction in price levels, not just a slowdown in price increases. Encouragingly, there are early signs of disinflation in sectors such as petroleum products, food, and pharmaceuticals. It is hoped that this trend continues throughout the year,” Yusuf concluded.
As the economy adapts to the new inflationary framework, stakeholders will be closely monitoring how the revised CPI methodology influences monetary policy, business decisions, and household spending in 2025.
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