In January 2025, Nigeria’s headline inflation rate was 24.48%, a significant drop from 34.80% in December 2024, according to the National Bureau of Statistics (NBS).
At first glance, this might seem like a welcome relief from the steep inflation that plagued the country throughout last year. However, the decline is not due to a sudden improvement in economic conditions but rather a rebasing of the Consumer Price Index (CPI)—a statistical adjustment rather than a reflection of a more affordable cost of living for Nigerians.
Understanding the CPI rebasing
CPI rebasing is a crucial exercise that ensures inflation measurements reflect the realities of current consumer spending patterns. Over time, economies evolve—new goods and services emerge, consumption habits shift, and structural economic changes occur. Without periodic rebasing, inflation figures can become distorted, failing to capture the actual cost pressures faced by households. Many countries update their CPI base every five to ten years to maintain accuracy in economic analysis and policy formulation.
However, Nigeria’s last CPI rebasing was conducted in 2009, meaning inflation calculations were based on an outdated consumption structure that no longer aligned with contemporary economic realities.
In the 16 years since, consumer spending patterns have changed dramatically—technological advancements, shifting food preferences, and the rise of digital services have altered the weight of different goods and services in household expenditures. Without a rebased CPI, inflation figures risked misrepresenting economic trends and policy decisions.
In January 2025, the NBS rebased the CPI to 2024 to better reflect these changes. This process involved updating the basket of goods and services used to calculate inflation and adjusting their weights to mirror contemporary consumer behavior.
Notably, the weight assigned to food items decreased from 51.8% to 40.1%, acknowledging shifts in household spending. While this statistical update provides a more accurate measurement of inflation, it does not necessarily translate to immediate relief for consumers facing high prices.
A statistical drop, not an economic one
Despite the reported inflation decline, the cost of essential goods and services remains high. Prices of staples such as rice, beans, and bread continue to soar, transportation costs remain burdensome, and energy prices have not seen meaningful reductions. The hardship many Nigerians faced in 2024 persists, with wages lagging behind inflation and household purchasing power still severely strained.
The CPI rebasing does not erase the realities of food inflation, rising utility costs, and stagnating incomes. Many Nigerians have expressed skepticism about the reported inflation drop as their day-to-day expenses remain overwhelming. While inflation calculations are necessary for policy and economic planning, they must not be mistaken for tangible economic relief.
Nigeria’s monetary policymakers, including the Central Bank of Nigeria (CBN), have been battling inflation through aggressive interest rate hikes. With inflation now seemingly lower, there may be calls to ease monetary tightening. However, policymakers must recognise that while the numbers show a decline, economic pressures on ordinary citizens remain high.
The government must go beyond inflation metrics and address real economic challenges—food security, industrial productivity, wage growth, and energy stability. Without these interventions, Nigerians may continue to struggle despite a statistical inflation drop.
Conclusion
The reported drop in Nigeria’s inflation rate in January 2025 should be taken with cautious optimism. While rebasing has adjusted the statistical outlook, the economic realities of high food prices, rising living costs, and weak purchasing power persist. For Nigerians, inflation is not just a number—it’s an everyday struggle, and until the cost of living genuinely eases, the reported decline will remain largely theoretical.
