Financial and economic analysts expect the Monetary Policy Committee of the Central Bank of Nigeria to reduce the benchmark interest rates following the drop in the inflation rate released by the National Bureau of Statistics on Tuesday.
The experts also called for a rejig of the country’s economic policies to meet the masses’ yearnings, stressing that though the new inflation rate is lower than the previous figure, the prices of commodities are still very high.
The NBS on Tuesday declared that Nigeria’s headline inflation dropped to 24.48 per cent in January 2025 following the rebasing of the Consumer Price Index. This represents a significant decline from the 34.80 per cent recorded in December 2024.
The Statistician-General of the Federation, Prince Adeyemi Adeniran, disclosed this at the unveiling of the rebased CPI report in Abuja.
He said, “The All-Items Index, which is used to measure headline inflation for January 2025, was 110.7, resulting in a headline inflation rate of 24.48 per cent on a year-on-year basis. This increase was mainly driven by Food and Non-Alcoholic Beverages, Restaurants and Accommodation Services and Transport.”
He explained that the rebasing exercise was necessary to ensure a more accurate reflection of inflationary pressures in the country.
Adeniran said the CPI rebasing involved shifting the base year from 2009 to 2024 to better capture changes in consumption patterns, pricing, and household expenditures.
He noted that Nigeria had not rebased its CPI in over a decade, even though the exercise is typically conducted every five years to reflect economic realities.
With the rebasing, the methodology for computing inflation has been refined, including the adoption of the Classification of Individual Consumption According to Purpose 2018 version, which improves the categorisation of household expenses.
Reacting to the rebased CPI by the bureau, analysts said they would be expecting the Monetary Policy Committee of the Central Bank of Nigeria to consider a dip in the Monetary Policy Rate (benchmark interest rates).
Speaking on the development, Professor of Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, welcomed the rebasing on the country’s inflation rate but expressed hope that it would affect the interest rates.
He said, “The rebasing exercise is primarily meant to reflect current inflationary pressure which explains why the NBS has moved the reference price period to 2024. Against this backdrop, the development is welcome.
“The benefits of the rebased number are several. First, it will help the government, especially the monetary authority, to make more informed decisions. It makes our inflation number comparable with the rest of the world since it is based on standard and updated methodology. This can place both foreign and domestic investors in a stronger position to make investment decisions in favour of Nigeria.”
Echoing similar sentiments, the Managing Director of Arthur Stevens Asset Management, Tunde Amolegbe, noted that the rebasing is supposed to capture economic activity and the size of the economy as accurately as possible.
“What seems to have happened now is that while we still have significantly higher prices within the economy, the inflation figures have dropped because the denominator, which is the size of the economy itself, has changed. This is because it’s now larger than what was being used previously.
“In the case of food inflation, for instance, some products that were not captured previously have now been included. For me, any effort to accurately capture this activity is useful because of its impact on macroeconomic indexes, which also impact people’s lives.
“For instance, if inflation is now at 24 per cent rather than 34 per cent, that could give an impetus to the MPC to consider gradually lowering interest rates. This will have a real-life impact. Now that the inflation number for January has provided evidence of weakening inflationary pressure, I expect the Monetary Policy Committee of the CBN to pause rate hikes to create room for output growth,” he asserted.
