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Inflation Slows in Nigeria in January Following CPI Rebasing
Nigeria’s inflation rate has shown signs of slowing down in January 2025, following a significant change made by the National Bureau of Statistics (NBS) in how inflation is calculated. This adjustment, known as CPI rebasing, has altered the way various items are weighted in the Consumer Price Index (CPI), which is a key measure of inflation.
In January, the headline inflation rate dropped to 24.8%, a notable decrease from the previous month’s rate of 34.8% in December 2024. This decline is largely attributed to the NBS’s new methodology, which has reduced the importance of food prices in the overall inflation calculation.
Specifically, the weight assigned to food prices was cut from 51.8% to 40.1%. This change has helped lessen the impact of rising food costs on the overall inflation figure, even though prices for food items are still on the rise due to ongoing supply chain issues and the depreciation of Nigeria’s currency, the naira.
Before this rebasing, many analysts had predicted that Nigeria’s inflation would remain high at the start of 2025, with hopes for a gradual decrease later in the year. However, with the revised CPI structure now in place, it introduces new factors that could change how inflation behaves moving forward.
Although food prices have continued to increase, food inflation was recorded at 24.08% in January compared to 39.84% in December, the reduced weight of food prices has softened their overall impact on Nigeria’s inflation rate.
The CPI rebasing also affected how other categories of spending contribute to inflation. This change may help reduce some of the sharp increases in inflation that had been observed in previous months.
Nevertheless, there are still significant risks related to structural inflation, particularly concerning energy and transportation costs. For instance, rising diesel prices and possible changes to electricity tariffs remain major concerns for both businesses and households across Nigeria.
While it is encouraging to see a decrease in headline inflation, experts caution that this drop may not fully capture the financial pressures faced by consumers, especially regarding essential goods. The new CPI will provide a clearer understanding of how Nigeria’s inflation situation is changing over time.
In light of these developments, the Monetary Policy Committee (MPC) is likely to adopt a careful approach when responding to these new inflation figures. Although a slowdown in inflation could bring some relief to consumers and businesses alike, uncertainties surrounding food prices and fluctuations in currency value may keep policymakers vigilant.
Overall, Nigeria’s inflation slows down as a result of these adjustments made by the NBS through CPI rebasing. This change aims to create a more accurate reflection of consumer price changes and may help stabilize economic conditions moving forward. However, with ongoing challenges such as rising food prices and energy costs, it remains crucial for policymakers to monitor these trends closely.
As Nigeria navigates this complex economic landscape, understanding how these changes affect everyday life will be essential for both consumers and businesses alike. The hope is that with careful management and monitoring of inflation dynamics, Nigeria can achieve a more stable economic environment that benefits everyone.
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