In NBS’ new inflation formular, food prices rise count less

Nigeria’s National Bureau of Statistics (NBS) announced a significantly lower inflation rate on Tuesday after rebasing the Consumer Price Index (CPI), effectively introducing a new formula for calculating price changes.

Under the revised methodology, annual headline inflation—the key indicator measuring price changes over the past year—dropped sharply from 34.80% in December 2024 to 24.48% in January 2025.

It is a stunning manoeuvre that has given a blunting effect to the nation’s devastating cost of living crisis – the worst in a generation.

To rebase the calculation, the NBS has now set 2024 as the new base year. The bureau stated that this update ensures the starting point for measuring price changes aligns with the current economic environment. Until now, the CPI had been based on data from 2009, when consumer habits and market conditions were notably different.

“All these enhancements to the methodology, in addition to shifting the base year and price reference periods closer to the present, mean that NBS price estimates will better reflect the inflationary pressures experienced within the economy,” said Statistician-General Adeyemi Adeniran.

However, the new formula introduces a significant change that could obscure the actual cost crisis. While expanding the number of items in the inflation basket, the NBS has lowered the weight of food prices—historically the primary driver of inflation in Nigeria.

Previously, food prices accounted for 51.8% of the Consumer Price Index (CPI) basket. Under the new system, that share has been reduced to 40.1%. Meanwhile, the number of goods and services in the basket has increased from 740 to 934, offering a broader representation of consumer spending patterns.

As a result, annual food inflation fell dramatically from 39.84% in December 2024 to 26.08% in January 2025.

Some analysts argue that the change could make inflation appear lower than what many Nigerians experience, as food remains the most essential expense for most households. Food inflation has remained persistently high in recent years, driven by subsidy removals, currency devaluation, and supply chain disruptions.

“This adjustment means that even if food prices continue to rise sharply, their impact on the overall inflation rate will appear smaller,” said investment firm Risevest in a briefing.

Inflation has been a major concern for the Nigerian economy, with the headline rate reaching record highs since 2023 following President Bola Tinubu’s removal of petrol and electricity subsidies and the devaluation of the naira.

The NBS insists that the revision aligns with global best practices, as most countries periodically update their inflation methodology to reflect evolving consumption patterns. The bureau argues that the change is not intended to mask economic hardships but to provide a clearer and more accurate picture of price movements.

The methodological change follows a similar revision by the NBS last year when the unemployment rate was drastically reduced from 33.3% in the last quarter of 2020 to 4.1% in the first quarter of 2023.