CPI Rebasing: Finding Plausible Reasons for Decrease in Inflation from 34.8% to 24.5%

Abstract

Price level is a crucial macroeconomic variable that significantly influences household, firm, and government objectives. Monitoring the movement of prices within the economy is essential for effective fiscal and monetary policy formulation. The Consumer Price Index (CPI) measures the changes in the general price level of household-consumed goods and services compared to a base year, set at an index value of 100. Following, the rebasing of CPI, Nigeria’s inflation rate dropped from 34.80% in December 2024 to 24.48% in January, 2025. While rebasing enhances economic assessments, it does not necessarily reflect the true standard of living of the people. It is on this premise that this brief examined the recent rebasing of the Nigeria’s CPI with a view to providing empirical basis for legislative interventions. In this regard, the brief put forward the following punchy recommendations for the consideration of the 10th National Assembly; The National Assembly (NASS) may wish to adhere to the United Nations Statistical Commission which suggest that countries should rebase, every five years to ensure that their economic indicators remain in line with changing global economic conditions and internal structural shifts. Relevant committee of NASS may wish to engage the NBS to ascertain the conceivable reason(s) for shrinking the weight of food and non-alcoholic beverages by 22.8% in the new CPI computation using 2024 as base year. The brief notes that food and non-alcoholic beverages are obviously household items that gup a reasonable proportion of people’s income. NASS is further advised to be concerned with the drop in the weight assigned to Clothing & Footwear, House, Water, Electricity, Gas and Other fuels in the new CPI. The reason for this, is that the aforementioned items are fundamental human needs and as such shrinking their weight in the CPI basket might be sending a wrong signal that might not reflect the reality of Nigerians economy condition. The brief commends the NBS for scaling up the weights of education services by 58.9%, health by 103.3%, restaurant & accommodation services by 975.0% and transport by 64.6%. The authors are of the view that this skilling up is in line with the present economic condition in the country. The new weights of these items will go a long way in showcasing the true state of inflation in the Nigeria’s economy. Given that the new CPI confirms that housing, transport, and healthcare costs are the major inflation drivers, NASS may wish to pass a resolution urging the executive to introduce subsidies or price control measures in these critical sectors to alleviate economic burdens on citizens. The NASS is by this brief advised not to be misled by the drop-in inflation rate given that this is not as a result of a fall in the prices of goods and services, but rather as a result of the change in method of calculation of the CPI. The basket of goods and services used to track inflation was updated and some items now carry different weights. The NASS may wish to support food security programs aimed at mitigating rising food inflation in the country. Implementing the recommendations outlined in this brief will enhance economic planning and policy effectiveness.