By Ayo Onikoyi

As the world continues to grapple with inflationary shocks and fragile economic recoveries, Nigeria faces a unique challenge — interpreting its own inflation data amidst statistical changes that could mislead policymakers.

In a detailed report made available to our correspondent, Arume Tsekiri explores how the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) may be distorting inflation narratives, potentially steering monetary policy in a questionable direction.

In January 2025, the NBS updated Nigeria’s inflation base year from 2009 to 2024, a long-overdue exercise meant to reflect contemporary consumption patterns.

This rebasing process, though methodologically sound, has sparked concerns about the credibility of resulting inflation figures. Notably, headline inflation dropped sharply to 24.48% in January 2025, down from 34.80% in December 2024 — a statistical drop that many experts argue is not reflective of real economic conditions.

CPI rebasing, while globally accepted, often recalibrates the expenditure basket used to calculate inflation. In Nigeria’s case, the reduction in the weight of Food & Non-Alcoholic Beverages from 51.8% to 40% has raised red flags.

Given that food inflation consistently outpaces headline inflation, critics argue that the new weight underrepresents the financial strain on households.

In contrast, categories like Restaurants and Accommodation saw a steep rise in weighting — from 1.2% to 12.9% — which may not mirror the average Nigerian’s spending reality.

Transport and health also saw an upward adjustment in weight, climbing from 6.5% to 10.7% and 3.0% to 6.1% respectively. While these shifts attempt to capture evolving consumer behaviour, they also raise the possibility that inflation data is now less relatable to the average citizen who still struggles with rising food and housing costs.

For instance, the weight for Housing, Water, and Electricity was halved from 16.7% to 8.4%, despite these sectors remaining critical pain points for Nigerian households.

The broader risk, according to Tsekiri, lies in the possible misinterpretation of inflation trends by the Central Bank of Nigeria (CBN). Since 2022, the apex bank has pursued an aggressive monetary tightening policy, raising the Monetary Policy Rate (MPR) to 27.5% by February 2025 in a bid to contain inflation.

But with rebased inflation figures painting a rosier picture, there is a risk that the CBN could prematurely halt or reverse its tightening measures.

If the inflation rate is understated due to rebasing, a policy pivot could reduce borrowing costs and stimulate credit expansion — potentially stoking demand-pull inflation. Moreover, Nigeria’s heavy reliance on imported goods means that any depreciation of the naira, fueled by policy missteps, could quickly reignite inflationary pressures.

This scenario is especially relevant given that global commodity prices remain volatile and geopolitical tensions persist.

While the naira has recently shown signs of stability — thanks to forex market reforms, abolition of the multiple exchange rate system, and the introduction of a unified FX code — maintaining this stability requires accurate macroeconomic data.

Misleading inflation signals could shake investor confidence, deter foreign capital inflows, and trigger renewed pressure on the foreign exchange market.

Fiscal policy is not immune to the implications of CPI rebasing. Budget planning, debt servicing, and welfare spending rely heavily on inflation forecasts.

An underestimated inflation rate could result in poor budget allocations, underestimate real interest costs, and lead to misguided subsidy or tax policies. For a nation battling rising poverty and dwindling purchasing power, such errors could have far-reaching consequences.

In addition, rebased inflation figures could affect the design of social intervention programs and wage negotiations.

Public sector workers and unions may challenge official inflation numbers, citing the disconnect between reported figures and actual cost of living. This mismatch could stir industrial unrest or force the government to commit to unsustainable fiscal concessions.

Tsekiri’s report emphasised the importance of transparency and public engagement. Although the NBS held stakeholder workshops to explain the rebasing process, she advocates for continued public education to help businesses, analysts, and consumers interpret the new figures accurately.

According to her, a well-informed public and private sector is critical for ensuring collective resilience during economic adjustments.

To bridge the gap between statistical accuracy and economic reality, the government must complement data-driven policies with real-world interventions.

Targeted fiscal measures, including tax relief, energy subsidies, and support for local industries, can cushion the immediate effects of inflation on households and businesses.

These interventions would ensure that even if inflation is statistically down, its real impacts are still addressed.

The CBN, for its part, must avoid relying solely on CPI figures when setting interest rates. A broader analysis of core inflation, exchange rate volatility, and global economic indicators is necessary to determine the true direction of monetary policy.

The danger of over-reliance on rebased data is not just academic; it could affect millions of lives and livelihoods.

Ultimately, Nigeria’s inflation data should inform policy — not define it in isolation. Policymakers must balance the statistical benefits of CPI rebasing with the lived experiences of citizens.

Economic management must be grounded in reality, ensuring that fiscal and monetary responses are not only statistically justified but socially relevant.

As the nation moves forward, experts warn that Nigeria must remain vigilant to global developments.

The possibility of external shocks — such as disruptions in commodity supply chains or shifts in U.S. trade policy — could affect import prices and domestic inflation.

Preparedness will depend on a responsive and adaptable monetary policy, guided by both robust data and economic intuition.