Financial analysts and economists are anticipating a potential reduction in Nigeria’s benchmark interest rates following the latest inflation report by the National Bureau of Statistics.
Despite the decline in the inflation rate, experts emphasize that commodity prices remain high and call for a review of economic policies to better address the needs of the people.
On Tuesday, the NBS revealed that Nigeria’s headline inflation dropped to 24.48% in January 2025, following the rebasing of the Consumer Price Index.
This marks a significant reduction from the 34.80% recorded in December 2024.
Speaking at the report’s unveiling in Abuja, Statistician-General of the Federation, Prince Adeyemi Adeniran, explained that the rebasing process involved updating the base year from 2009 to 2024 to more accurately reflect shifts in household expenditures, consumption patterns, and pricing trends.
He noted that Nigeria had not undertaken a CPI rebasing in over a decade, despite the global practice of doing so every five years.
“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 per cent on a year-on-year basis. This increase was mainly driven by Food and Non-Alcoholic Beverages, Restaurants and Accommodation Services and Transport,” Adeniran stated.
He also highlighted the methodology changes that accompanied the rebasing, including the adoption of the Classification of Individual Consumption According to Purpose 2018 version.
Additionally, the exclusion of own-production, imputed rents, and gifted items from calculations ensures that inflation figures reflect only actual monetary expenditures.
A closer look at the data showed that food inflation stood at 26.08% in January 2025, down from 39.84% in December 2024.
Urban Inflation was recorded at 26.09%, while Rural Inflation stood at 22.15%. Core Inflation, which excludes farm produce and energy costs, was measured at 22.59%.
To enhance inflation tracking, the rebased CPI introduced several special indices, including the Farm Produce Index (10.50%), Energy Index (8.9%), Services Index (10.41%), Goods Index (10.79%), and Imported Food Index (11.47%).
Adeniran assured stakeholders that the rebasing exercise, which involved consultations with organizations such as the Central Bank of Nigeria, International Monetary Fund, and World Bank, was aimed at improving the accuracy and credibility of Nigeria’s inflation data.
He urged analysts and journalists to present the findings accurately to prevent misinterpretation.
Call for Lower Interest Rates
In response to the rebased CPI, financial experts expressed expectations that the Monetary Policy Committee of the Central Bank of Nigeria might consider lowering the Monetary Policy Rate.
Professor Uche Uwaleke of Nasarawa State University, Keffi, acknowledged the rebasing’s importance and its potential impact on policy decisions.
“The rebasing exercise is primarily meant to reflect current inflationary pressure which explains why the NBS has moved the reference price period to 2024. Against this backdrop, the development is welcome.
“The benefits of the rebased number are several. First, it will help the government, especially the monetary authority, to make more informed decisions. It makes our inflation number comparable with the rest of the world since it is based on standard and updated methodology. This can place both foreign and domestic investors in a stronger position to make investment decisions in favour of Nigeria,” he said.
Managing Director of Arthur Stevens Asset Management, Tunde Amolegbe, echoed similar views, stating that the rebasing process allows for a more accurate reflection of economic activity and the true size of the economy.
“What seems to have happened now is that while we still have significantly higher prices within the economy, the inflation figures have dropped because the denominator, which is the size of the economy itself, has changed. This is because it’s now larger than what was being used previously.
“In the case of food inflation, for instance, some products that were not captured previously have now been included. For me, any effort to accurately capture this activity is useful because of its impact on macroeconomic indexes, which also impact people’s lives.
“For instance, if inflation is now at 24 per cent rather than 34 per cent, that could give an impetus to the MPC to consider gradually lowering interest rates. This will have a real-life impact. Now that the inflation number for January has provided evidence of weakening inflationary pressure, I expect the Monetary Policy Committee of the CBN to pause rate hikes to create room for output growth,” he asserted.
Understanding the CPI Drop
Director of the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf, said the decline in inflation following the rebasing was expected, given the high inflation rates recorded in 2024.
“The sharp deceleration of the headline inflation rate from 34.8 per cent in December 2024, to 24.48 per cent in January 2025, the drop in food inflation from 39.8 per cent to 26.08 per cent and the decline in core inflation from 29.28 per cent to 22.59 per cent did not come as a surprise given the review of the computation base year from 2009 to 2024.
“There is additionally a strong base effect on the inflation figures given the high inflation regime in 2024, which had a considerable effect on the year-on-year inflation outcomes. Besides, transaction demand in December 2024 was typically much more intense because of the festivities while the spending momentum in January was predictably much slower because of lower disposable incomes following intense spending in the previous month,” he explained.
Yusuf, however, cautioned against interpreting the inflation drop as a decline in prices.
“A drastic reduction in inflation figures is not tantamount to a reduction in price level; inflation reduction simply means a reduction in the rate of increase in the general price level,” he clarified.
He stressed that Nigerians still face high living costs, noting that energy prices, currency depreciation, high interest rates, and import costs continue to strain businesses and households.
Experts Call for Economic Reforms
Similarly, National President of the Association of Small Business Owners of Nigeria, Dr. Femi Egbesola, emphasized the need for careful interpretation of the rebased CPI, warning of potential policy missteps.
“Rebasing potent risks such as misleading economic signals, policy missteps, and public skepticism. A cautious approach, integrating clear communication strategies and robust stakeholder engagement, will be essential to ensuring that inflation data accurately reflects Nigeria’s economic trajectory,” he asserted.
Director-General of the Lagos Chamber of Commerce and Industry, Dr. Chinyere Almona, added that while the rebased CPI offers a clearer economic picture, it does not translate to an improvement in living conditions.
“A rebased CPI provides a ‘clearer view of the economy,’ which considering the drop of headline inflation from 34.8 per cent to 24.48 per cent ‘may seem positive but does not automatically improve living standards.’”
She explained that the CPI rebasing was an update of how different goods and services are weighted, rather than an actual reduction in prices.
“The previous method likely overemphasised food inflation, while the new approach incorporates updated economic data and adjusted weightings. This difference does not indicate a sharp fall in prices but a revised way of calculating inflation,” she noted.
Almona further warned that, despite the lower inflation rate, real incomes remain under pressure due to stagnant wages and high unemployment.
“Prices are still rising, wages remain stagnant, and unemployment is high, keeping real incomes under pressure,” she submitted. “The rebased inflation rate only reflects a different measurement, not an actual drop in prices.”
She urged the government to implement policies aimed at stabilizing the exchange rate, boosting local production, and addressing inflationary pressures, particularly in the agricultural sector.
“One key priority is tackling food inflation, which accounts for over 50 per cent of price increases. Policies should focus on boosting agricultural productivity, reducing post-harvest losses, and improving transportation and storage infrastructure to ensure food affordability,” Almona advised.
She also called on the Central Bank of Nigeria to adjust monetary policies strategically, balancing inflation control with economic growth.
