The sharp drop in Nigeria’s inflation rate from 34.8% in December 2024 to 24.48% in January 2025 has sparked mixed reactions from economic analysts, businesses, and households.
Inflation rate dropped to 24.48% in January after a rebasing exercise, the country’s statistical authorities have revealed.
The news figures showed food inflation rate now 26.08 percent while GDP figures are yet to be out.
The National Bureau of Statistics (NBS) calculated January’s inflation figures using a revised methodology, which includes a new base year and updated weights for the consumer price index (CPI).
Nigeria’s last inflation report before this one showed a surge in inflation rate to 34.80% in December 2024, up from 34.60% in November 2024.
This represents a 0.20% increase month-on-month and a 5.87% increase year-on-year compared to December 2023. The inflation rate was driven by the festive period demand for goods and services in December. Food inflation had dropped slightly to 39.84% in December from 39.93% in November.
On the other hand, core inflation, which excludes food and energy prices, rose to 2.24% in December from 1.83% in November.
In the new methodology, the proposed base year for inflation computation is 2024. The year was proposed to capture the structural changes driven by the removal of subsidies on FX and PMS.
Also,the constituents of the inflation basket were expanded from 740 to 960 and on the divisional level, items contributing to the inflation basket were increased to 13 from 12 with the addition of financial and insurance services.
Analysts at FBNQuest projected Nigeria’s headline inflation post-rebasing CPI exercise to show a moderation in the headline reading in the month of January.
“Our expectation is premised on the high base effect from last year and the reduced impact of inflationary components on Nigeria’s inflation basket due to the re-adjustment of the CPI weighting,” they said.
President Bola Tinubu last year announced a 15 percent inflation target for Nigeria’s 2025 budget.
Data on similar countries shows rebasing has proven to effect a little change in inflation rate before and after rebasing. For instance, the year-on-year inflation rate in South Africa decreased by 0.2 percent after rebasing, while Kenya’s inflation decreased by 1.5 percent. In Ghana however, it rose by 6.9 percent.
However data suggests that not all countries that rebased their CPI saw inflation decline. Uganda, for instance, experienced an increase from 2.3 percent to 2.71 percent after shifting its CPI base year from 2009 to 2021. Kenya and Nigeria have had similar experiences in past rebasing exercises.
The new figure might come as a relief as 85.5 percent of large businesses in the country perceive inflation levels to be high, which demonstrates the persistent economic challenges faced by enterprises in Nigeria.
This is according to the Central Bank of Nigeria (CBN)’s Inflation Expectations Survey (IES) for January 2025.
The survey further detailed that 78.2 percent of medium-sized business, 77.6 percent of small business, 80.9 percent of micro businesses also share similar sentiments regarding inflationary pressures.
…How we arrived at 24.48% rebased inflation figure – Statistician General
Reacting to the drop in inflation, from 34.8 percent recorded in December to 24.48 percent in January 2025, the Statistician General of the Federation, Adeyemi Adeniran says this is due to the rebasing exercise recently embarked on by the Bureau.
With the rebasing exercise, the price reference period (base year) changed from 2009 to 2024 while the relative index changed from long to short term.
Also, according to the 2024 CPI weighting structure, food and non-alcoholic beverages top the basket with weight dropping from 51.8 percent in 2009 to 40 percent in 2024, Housing, water, electricity and other fuels dropped from 16.7 percent to 8.4 percent. While transport increased from 6.5 percent in 2009 to 10.7 percent, education services increased from 3.9 percent to 6.2 percent, restaurants and accommodation increased from 1.2 percent to 12.9 percent in 2024.
According to the Statistician General, rebasing of the Consumer Price Index (CPI) became imperative with innovation, development, globalisation, and changes in the production and consumption pattern of goods and services within the borders of the nation.
“Changes in the consumer pattern equally leads to a change in the general composition of the basket of items which is used to measure the average change in price levels in the economy. Given all these, it is necessary to move the base year to which the CPI index is measured, to a year much closer to the current period,” he said.
The Statistician General explained that 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 percent on a year-on-year basis. This increase he said was mainly driven by food and non alcoholic beverages, restaurants and accommodation, services and transport.
Also, the food index for January 2025 was 110.03, resulting in a food inflation rate of 26.08 percent year-on-year. The core index which is all-items less farm produce and energy for January 2025 was 110.7, which gave rise to a Core inflation rate of 22.59 percent year-on-year.
Disaggregating by sector, the Urban inflation rate was 26.09 percent, while the rural inflation rate was 22.15 percent.
“The rebased all items index in January 2025 was 110.68, while the headline inflation rate on year-on-year basis stood at 24.48 percent in January 2025. This means that the general prices of goods and services in Nigeria increased by 24.48 percent compared to January 2024.
“The rebased food index in January 2025 was 110.33, while the food inflation rate on a year-on-year basis stood at 26.08 percent in January 2025. This means that the general prices of food items in Nigeria increased by 26.08 percent compared to January 2024.
“The rebased core index in January 2025 was 110.87, while the core inflation rate on a year-on-year basis stood at 22.59 percent in January 2025. This means that the general prices of core items in Nigeria increased by 22.59 percent compared to January 2024,” Adeniran explained.
…Inflation rate decline influence by change in computation base year — CPPE
In a swift response, the Centre for the Promotion of Private Enterprise (CPPE), has cautioned that the drop does not necessarily translate to lower prices.
CPPE’s Director/CEO, Muda Yusuf, noted that the inflation rate decline was largely influenced by a change in the computation base year and the expected post-holiday reduction in consumer spending.
He attributed this shift primarily to the change in the computation base year from 2009 to 2024, as well as the natural slowdown in spending after the festive season.
Despite the positive inflation numbers, Yusuf emphasised that a lower inflation rate does not mean a reduction in prices. Instead, it reflects a slower rate of price increases. High costs of energy, imports, transportation, and insecurity continue to strain businesses and households.
However, Yusuf noted early signs of relief, citing slight reductions in the prices of petroleum products, certain food items, and pharmaceuticals.
He expressed hope that this trend would continue throughout 2025, leading to meaningful disinflation.
The CPPE urged the government to intensify efforts to address key cost drivers, ensuring that Nigerians feel real economic relief beyond statistical improvements.
…MAN laments as raw materials imports rise 119% to N4.53trn
Meanwhile, the Manufacturers Association of Nigeria (MAN) has lamented the rising cost of imported raw materials which jumped by 119 percent to N4.53 trillion in the first nine months of 2024 (9M’24) from N2.07 trillion in the same period of 2023 (9M’23).
Director General of MAN, Segun Ajayi-Kadir, said that the astronomical increase underscores Nigeria’s continuous heavy dependence on imported raw materials for production which exposes the country’s manufacturers to global market fluctuations.
Data from the National Bureau of Statistics (NBS) revealed that raw material imports into the country were valued at N1.467 trillion in Q1’24; N1.482 trillion in Q2’24 and N1.58 trillion in Q3’24, totaling N4.53 trillion in 9M’24.
This represents a 118.8 percent increase over the N2.07 trillion recorded in 9M’23, made up of N555.47 billion in Q1’23; N567.80 billion in Q2’23 and N950.93 billion in Q3’23.
According to the Manufacturing CEOs Confidence Index, a quarterly publication of MAN, manufacturers have continuously identified high cost of local and imported raw materials as one of the major challenges affecting manufacturing operations in the country.
Many attempts have been made by different administrations to promote local sourcing of raw materials through a backward integration policy, which have not yielded much fruit.
Commenting on the matter, President of the Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, cited the failure of Nigeria’s import substitution strategy as a reason for the country over-reliant on imported raw materials.
“A lot of the companies are just involved in importing their raw materials. In some areas, we cannot do backward integration because we do not have the raw materials or the technology to do it. If you are manufacturing a car in Nigeria, you cannot backward integrate to start building engines or even producing tyres. You more or less still import most of the components and just put them together.”
