In January 2025, Nigeria saw a deceleration in its inflation rate following the implementation of a rebased Consumer Price Index (CPI) by the National Bureau of Statistics (NBS). This adjustment changed the weighting of key components in the inflation basket.
Headline inflation dropped to 24.48% in January from 34.8% in December 2024, reflecting the impact of the revised methodology by NBS. The adjustment reduced the weight of food in the inflation calculation from 51.8% to 40.1%, helping to mitigate the effects of increasing food prices while some underlying pressures remained.
Prior to the rebasing, analysts had predicted that Nigeria’s inflation would stay high in early 2025 but gradually decrease later in the year. The new CPI structure introduced by the rebasing may bring about changes in inflation dynamics. Despite food prices continuing to rise due to disruptions in the supply chain and naira depreciation, the reduced weighting lessened their impact on the overall inflation figure, with food inflation dropping to 24.08% from 39.84% in December 2024.
The rebasing also altered the contribution of other expenditure categories, potentially smoothing out previous inflationary spikes. Nonetheless, there are ongoing structural inflation risks, especially concerning energy and transport costs.
Although headline inflation has decreased, analysts caution that this decline might not entirely reflect the price pressures on consumers, especially for essential goods. With the new CPI structure now in place, upcoming inflation readings will provide a clearer view of Nigeria’s evolving inflationary landscape.
The Monetary Policy Committee (MPC) is anticipated to adopt a cautious approach in response to the updated inflation numbers. While a slowdown in inflation could offer some relief, uncertainties surrounding food inflation and currency fluctuations may keep policymakers vigilant.