By Ayobami Ayorinde, Uchechukwu Eze and Seyi Akinbodewa - The National Bureau of Statistics (NBS) on Monday released the latest monthly inflation data which showed a notable decline in Nigeria’s key inflation figures.
Headline inflation slowed to 23.18% in February 2025 from 24.5% in the previous month, while food inflation dropped to 23.5% from 26.1% over the same period. Following the rebasing of Nigeria’s Consumer Price Index (CPI) in January 2025, the country’s headline inflation rate has seen a significant decline, dropping by 11.42% since November 2024 as seen in Fig. 1 below.
While this fall may appear as a positive development, a deeper analysis of the data from NBS throws up some crucial questions: What exactly is happening with inflation? Are there unusual shifts in the data? And what does this mean for inflation rates going forward?
When the rebased CPI was published for January 2025, the NBS highlighted only the year-on-year inflation rate while omitting the month-on-month change from its report. NBS also did not show recast figures for the previous months. However, with the inflation data for February 2025 presents a fuller, though still limited, picture. Tucked in the spreadsheet are the recast figures for December 2024 and the month-on-month changes for December 2024 to February 2025. This is a positive development but it raises fresh questions, especially about the significant swings in the reported figures.
Unusual Trends in Inflation Computation
According to the newly rebased CPI series, inflation slowed down to 23.18% in February 2025 from 24.8% in January 2025, with a moderate month-on-month change of 2.04%. However, using the rebased computations, NBS reported 15.4% as the headline inflation rate for December 2024 and an unprecedented -12.3% as the month-on-month rate for December 2024 as shown in Fig. 2 below.
This level of volatility is rare in Nigeria’s inflation data: month-on-month changes, historically, are usually gradual. From February 2024 to November 2024, monthly change in inflation remained within a relatively stable range of 2.14% to 3.12%. Likewise, data from February 2025 saw month-on-month return to 2.04%, in line with the previous trend before the December outlier. The lowest month-on-month change recorded in the last 26 years was -3.51%, which was in August 1999 as seen in Fig. 3 below.
This month-on-month change in December 2024, followed by a sharp inflation rebound to 24.5% in January 2025 (and a 10.7% m-o-m increase), raises eyebrows about the process and the factors driving these dramatic shifts. Moreso, December is typically a period of increased consumer spending due to the holiday season, which historically drives prices higher, not lower.
While inflation increased after the 2009 rebasing, its month-on-month growth was less pronounced compared to the 2024 rebasing figures. As show in Table 1, the 2009 CPI rebasing, using November as the base month, saw inflation increase from 12.4% to 13.9%, with month-on-month growth of 0.7% in November and 2.2% in December 2009.
Therefore, the key question is: What caused such a significant -12.3% change month-on-month between November 2024 and December 2024? And how did the headline inflation, with the new methodology, move from 15.44% in December 2024 to 24.48% in January 2025? Given that inflation rates typically move within a moderate and predictable range, this drastic shift calls for a detailed and coherent explanation from Nigeria’s statistical agency.
Base Effect of Computation Variations May Shoot Inflation beyond 30% in December 2025
The decision to use 2024 (a year that saw the highest inflation level in over two decades) as the new base year for calculating inflation is contestable but within the prerogative of the NBS. However, this decision has played a significant role in shaping the new figures. This methodological change seems to exert downward pressure on reported inflation, creating an impression of significant disinflation. While this slowdown may show some respite, the latest data showing inflation at 15.4% in December 2024 with a m-o-m change of -12.3%, suggests that inflation could rise sharply by December 2025, due to base effect: the very low base of December 2024 will likely translate to high inflation rate for December 2025.
Our simulation projecting inflation rates by December 2025 as shown in Table 2 (assuming a constant change in inflation between 1.5% and 2% per month) indicates that irrespective of the rates within the year, inflation rate may surge above 30% by December 2025: a 1.5% monthly change would push inflation up to 31%; while a 2% change would drive inflation to 37%. This will be largely on account of the extremely low base set for December 2024.
Inflation Decline More of a Statistical Shift than an Economic Relief
While the rebased inflation figures may suggest a cooling inflationary trend, it is important to know that this does not necessarily translate to an actual easing of general price pressures in the economy. Clearly, food and energy prices have been slowing down recently according to reports, but the reduction in the weight of food and fuel items in the CPI rebasing may have translated to reduced inflation figures considering that they are key drivers of inflation. The recent decline in inflation may not accurately capture the cost-of-living realities faced by Nigerians if the underlying factors driving inflation such as exchange rate volatility, food supply dynamics, and energy costs are not effectively and sustainably addressed.
Conclusion
As Nigeria continues to navigate its economic challenges, an accurate representation of inflation is essential for informed fiscal and monetary decision-making. To ensure clarity and transparency, it is important for the NBS to provide more insights on the significant changes recast figures for December 2024 and on the month-on-month inflation rates between December 2024 and January 2025. In addition, it is necessary for the country’s statistical agency to publish both the pre-rebased and post-rebased inflation figures together for a period of time—like December 2024’s 34.8% (pre-rebasing) and 15.4% (post-rebasing). Without such disclosure, the reported numbers may present an incomplete picture, similar to solving a mathematical problem without showing the working steps
