Does Nigeria’s rebased CPI data reflect market realities?

Nigeria's economic landscape has recently been under scrutiny following the release of the rebased Consumer Price Index data, offering insights into market realities, inflation trends, and potential implications for monetary policy decisions. Data from the National Bureau of Statistics revealed that Nigeria's rebased All Items index for January this year was 110.68, with headline inflation at 24.48% on a year-on-year basis. Additionally, food inflation stood at 26.08%, while core inflation hit 22.59%, indicating a significant shift in the composition of the inflation basket. To dissect these findings and discuss the prospective actions of Nigeria's Monetary Policy Committee, Dr. Biodun Adedipe, Chief Economist at B. Adedipe Associates, provided valuable analysis in a recent interview with CNBC Africa. Dr. Adedipe emphasized the updated CPI index's accuracy in reflecting market dynamics, highlighting the transition from a focus on food inflation to core inflation elements such as transportation, healthcare, and energy. The revised index not only offers a more nuanced understanding of inflation drivers but also guides policymakers in prioritizing key sectors, resource allocation, and economic growth strategies. The economist underscored the importance of addressing deficits in food production, manufacturing, energy, infrastructure, and housing to drive sustainable economic development. Amidst calls for lower interest rates and discussions on real rates and yields, Dr. Adedipe suggested that Nigeria's Monetary Policy Committee might consider a rate reduction following the rebased inflation data. With a positive real interest rate at hand and a focus on fostering economic growth over strict inflation targeting, the MPC's approach could align with broader expectations for the year. However, global economic shifts, including tariff wars and US oil output levels, pose external factors that could impact Nigeria's inflation trajectory and monetary policy decisions in the coming months. Dr. Adedipe highlighted the potential effects of inflation trends in the US on borrowing rates, cost of living, and the strength of the dollar, emphasizing the interconnected nature of the global economy and its relevance to Nigeria's economic outlook. As discussions revolve around Nigeria's 2025 budget size and its capacity to support economic growth, Dr. Adedipe emphasized the importance of budget execution and value for money in driving meaningful economic impact. By focusing on deliverables and performance metrics, rather than expenditure alone, Nigeria could maximize the budget's potential to stimulate growth and development. As Nigeria navigates a complex economic landscape, the insights provided by the rebased CPI data and the discussions on monetary policy direction offer valuable perspectives for policymakers and market participants alike, guiding strategic decisions in the pursuit of sustainable economic progress.