Nigeria’s CPI rebasing: What to expect and why it may not substantially affect inflation

As the National Bureau of Statistics (NBS) prepares to unveil Nigeria’s rebased Consumer Price Index (CPI), analysts, investors, and policymakers are keenly watching. Given Nigeria’s historically high food inflation and the fact that food weight in the CPI basket is among the highest globally, many expect the rebasing to bring significant changes to the way inflation is measured. However, a deeper analysis suggests that while the methodology and weighting adjustments will enhance data accuracy, the rebasing may not substantially alter Nigeria’s inflationary outlook.

Understanding the CPI rebasing

Consumer Price Index rebasing is a standard statistical exercise that updates the reference year used to measure price changes, ensuring that inflation reflects current economic realities and household consumption patterns. Nigeria last rebased its CPI in 2009. Since then, major shifts in consumer spending, inflationary trends, and structural economic changes have necessitated an update.

The new CPI rebasing, set to be released by the NBS, will incorporate:

1. A shift in the base year from 2009 to 2024, providing a more relevant benchmark for tracking inflation.

2. An expanded basket of goods and services, increasing from 740 items to 960, ensuring broader coverage of consumer expenditure.

3. Adjusted weightings in key categories, most notably a reduction in food and non-alcoholic beverages from 51.8 percent to 40.1 percent, with increases in transport (from 6.5% to 10.7%), health (from 3.0% to 6.1%), and restaurant & accommodation services (from 1.2% to 12.9%).

Food inflation: Still dominant, but not overwhelming

Nigeria’s food inflation is one of the highest globally, standing at 39.84 percent year-on-year as of December 2024. Food price volatility has been a major driver of overall inflation, exacerbated by factors such as insecurity, forex depreciation, supply chain disruptions, and climate shocks. However, despite the traditionally high weight assigned to food in Nigeria’s CPI basket, the rebasing will slightly moderate its influence.

Logically, if food inflation were hypothetically reduced to zero, inflation would still persist due to rising costs in transport, healthcare, and housing. The weight reduction for food from 51.8 percent to 40.1 percent does not mean food inflation will no longer be critical, but rather that other economic factors will gain prominence in inflation measurement.

Read also: Explainer: What GDP, CPI rebasing means for economy

Implications of the New CPI structure

1. A more balanced inflation picture

The rebasing reflects the evolving spending patterns of Nigerian households. The increase in weight for transport, health, and accommodation services acknowledges the growing importance of non-food expenses. This will provide a more comprehensive and balanced view of inflation.

2. Potentially lower reported inflation figures

Since food inflation has been significantly higher than inflation in other categories, reducing its weight could lead to a marginally lower overall inflation figure. However, this does not mean prices are stabilising—only that the composition of inflation will shift.

3. Better policy decision-making

With more accurate data, policymakers can develop more effective interventions. For instance, if transport and healthcare emerge as stronger inflation drivers post-rebasing, fiscal and monetary policies may need to address infrastructure and medical service costs more aggressively.

Does this mean inflation will fall?

Not necessarily. While the rebasing is a technical exercise that improves inflation measurement, it does not change the economic fundamentals driving price increases. The primary inflationary pressures—foreign exchange volatility, subsidy removals, structural bottlenecks, and supply shocks—remain unchanged. Even with a lower reported inflation rate due to weight adjustments, the cost of living crisis will persist unless underlying economic issues are tackled.

Conclusion

The world is watching Nigeria’s CPI rebasing closely, particularly because of the historical dominance of food in the inflation calculation. However, the logical expectation is that the rebasing will not drastically alter inflation figures in a way that misrepresents economic realities. Instead, it will provide a clearer, more updated view of inflation dynamics, helping policymakers and businesses make informed decisions.

As the NBS prepares to release the new inflation numbers, the key takeaway should be that while methodology adjustments refine how inflation is measured, they do not eliminate the underlying economic pressures driving price increases. The rebasing is a step in the right direction—but Nigeria’s inflation fight is far from over.