The National Bureau of Statistics (NBS) stated during a workshop this January that the inflation rate for December 2024 will be calculated using the 2009 base year, while January 2025 inflation will be benchmarked against a new 2024 base year.
Dr. Ayo Andrew Anthony, Head of Price Statistics at NBS, disclosed that both December 2024 and January 2025 CPI figures will be published in January 2025. The December data will be released on January 15, while the January CPI will follow at the end of the month.
The transition reflects the ongoing rebasing of the Consumer Price Index (CPI), a measure popularly referred to as inflation, to better capture current consumption patterns and price trends.
The NBS disclosed the CPI release dates and calculation benchmark year during a sensitization workshop held at the Nigerian Economic Summit Group (NESG) building on January 9, 2024.
Why NBS is rebasing CPI
Evolving Consumption Patterns: Over time, consumer spending habits shift, necessitating an update to the CPI basket.
Expanded Basket of Items: The number of items in the CPI basket will extend from 740 to 960, offering more granular insights.
Currency and Price Reference Updates: The current price reference year is long outdated, with 2009 serving as the baseline for 16 years. International best practices recommend rebasing every five years. Both Dr Ayo Anthony and Dr Moses Waniko of NBS at the workshop stated that NBS is committed to sticking to five years rebase plan aligning with international best practices.
Global Comparability: An updated CPI enables better comparison of the consumer price index with that of other countries.
Framework and methodology for calculating the 2024 base year
The household expenditure on consumption of goods and services was structured based on the 2023 Nigeria Living Standard Survey, and administrative statistics from agencies like CBN, NAICOM, and NBS National Accounts and Trade Divisions.
There are new reference periods and items weight for the 2024 CPI rebasing will entail using 2023 weight reference period, 2024 price reference period.
Migrating to the Classification of Individual Consumption According to Purpose (CIOCOP) 2018 version.
The NBS to digitize the collection of price data
Conduct a National Census of Retail Outlets which will include online retail outlets for comprehensive data collection.
Key Changes in the New CPI Methodology
New Classification Standards: Adoption of the 2018 Classification of Individual Consumption According to Purpose (CIOCOP) version, which introduces an additional division—Insurance and Financial Services which is weighted 0.05%.
Digital Data Collection: Price data will now be collected digitally, including online retail outlets, enhancing accuracy.
Weight Adjustments: Significant changes to the weight of various sectors in the CPI include:
- Food and non-alcoholic beverages – decreased significantly to 40.1% from 51.8%.
- Housing, water, electricity, gas and other fuels – decreased to 8.4% from 16.7%. Transport – increased to 10.7% from 6.5%.
- Health – increased to 6.1% from 3.0%.
- Restaurants and accommodation services – increase from 1.2% to 12.9%.
The weight of Restaurants and accommodation services increased because Hostel Accommodation of students from primary school to tertiary institutions is now classified under it. This was previously captured under education.
What it means for Nigeria – Implication for Nigeria as a country
- Dr. Ayo Anthony emphasized that rebasing the CPI is likely to result in an increased inflation rate. He cited examples from countries such as Uganda, Kenya, and Ghana, where rebasing exercises led to similar outcomes.
- However, this increase will not necessarily prompt immediate changes in monetary policy. The Central Bank of Nigeria (CBN) is expected to incorporate the rebased CPI into its inflation-targeting framework, ensuring policy responses are measured.
- Should the rebasing exercise lead to higher CPI rates, the government may need to adjust rates on debt instruments to attract foreign investments. This could, however, raise the cost of domestic borrowing.
What it means for ordinary Nigerians – Implication for citizens
- For Nigerians, a higher inflation rate post-rebasing does not imply worsened economic conditions. Instead, it provides a more accurate reflection of price changes in the economy.
- However, if the Central Bank reacts with an increase in the Monetary Policy Rate (MPR), it could affect borrowing costs and government securities. This, in turn, may impact the average Nigerian by increasing the cost of loans and other financial instruments.
- The NBS hopes that with a more accurate CPI, citizens will better understand inflation trends and their implications for the economy.