No comfort in rebased inflation figures

STICKING to its promise, the National Bureau of Statistics announced Nigeria’s rebased inflation data on February 18. The headline inflation rate was revised downwards to 24.48 per cent in January from 34.80 per cent in December. This is a huge difference.

It follows the long-awaited rebasing of the Consumer Price Index, with a new base year and updated weighting of the composite baskets.

While this recalibration was long overdue, it created the illusion that inflation had cooled significantly.

A closer inspection of the figures reveals a glaring disparity between statistical adjustments and the lived experiences of ordinary citizens.

The rebasing with a base year of January 2024 is nothing short of feel-good economics and blatantly deceptive.

It attempts to erase the punishing inflationary effects of the petrol subsidy removal; naira free float and electricity tariff hikes implemented by the Bola Tinubu administration.

These policies have triggered skyrocketing food and transportation costs, escalated energy costs for households and businesses, and forced the recent 50 per cent hike in telecom tariffs.

A more accurate reading could have been derived from setting 2023 as the base year.

Food inflation supposedly fell to 26.08 per cent down from 39.84 per cent under the new methodology. However, this sanitised figure does not reflect the burdens families face in the market, where prices of basic staples have more than quadrupled and remain out of reach for many.

A crate of eggs that cost N1,000 in 2023 is now N7,000 in urban communities. The government cannot ‘rebase’ hunger.

Businesses have not been spared. The Manufacturers Association of Nigeria reported a record N1.4 trillion in unsold inventories by the end of 2024 as inflation eroded demand for manufactured goods.

While the recalibration of Nigeria’s inflation basket aligns with global statistical best practices, which prescribe recurrent five-year adjustments, its timing is questionable.

The NBS shifted the base year from 2009 to 2024 and expanded the consumer basket from 740 to 960 items, claiming this adjustment reflects today’s consumption habits better. Yet, such technical changes do little to address the systemic factors driving high prices.

In this context, the rebasing of the inflation data appears more like statistical legerdemain than a reflection of improved economic conditions.

In 2024, the NBS unemployment figures suddenly dropped below 5.0 per cent compared with 56.1 per cent for unemployment and underemployment as of 2022 due to a change in the calculation methodology.

The NBS chose 2019 as the new base year, replacing 2010, for calculating Nigeria’s GDP which analysts estimate will then cross the $800 billion threshold.

Regardless, the rebasing is significant and designed to reflect current spending patterns due to changes in income levels, urbanisation, and technological advancements.

The weighting of baskets was adjusted with “food and non-alcoholic beverages” dropping from 51.80 per cent to 40.00 per cent; “housing, water, electricity, gas, and other fuels” downgraded from 16.70 per cent to 8.40 per cent.

“Transport” was upgraded from 6.50 per cent to 10.70 per cent while “restaurants and accommodation services” was upgraded from 1.20 per cent to 12.90 per cent to reflect rising rent, transport costs, and more people eating out in urban settings.

Analysts agree the new methodology and updated weights will ensure better inflation tracking. Policymakers can use the updated CPI data to adjust interest rates, wage policies, and social interventions. Businesses can use the refined inflation data to review pricing strategies, production planning, and investment decisions.

However, this is not a moment for self-adulation. Even if inflation dropped to 24 per cent, other African peers are doing better.

South Africa and Kenya recorded an inflation rate of 3.0 per cent in December. Neighbouring Benin recorded just 0.60 per cent inflation in January.

The real condition millions of Nigerians find themselves in is being unable to afford necessities.

The key inflation triggers viz: the collapse of the naira against the dollar from N480 in May 2023 to N1,500 today; five-fold hike in petrol prices; over 300 per cent hike in electricity (Band A) tariff, and the recent 50 per cent telecom tariff hike have combined to ensure that misery is a daily staple for 133 million Nigerians or 62.9 per cent of the population classified as multidimensionally poor.

The CPI rebasing is no shortcut to achieving Tinubu’s 15 per cent inflation target for 2025. That road must be paved with fiscal restraint, ramping up oil production, naira appreciation at the forex market, significant FDI inflows, and investment in critical infrastructure.

The CBN, which has implemented monetary tightening measures with limited impact retained the Monetary Policy Rate at 27.50 per cent at Thursday’s Monetary Policy Committee meeting as expected to pause six consecutive hikes by a cumulative 875 basis points seen in 2024. This reflects its confidence in the rebased inflation numbers.

Yet inflationary pressures linger. Expansionary government spending has yet to abate under Tinubu.

Money supply surged by 51 per cent year-on-year to N108.96 trillion in November, driven by increased government domestic borrowing. The N54.9 trillion 2025 budget is double that of 2024 but N14.3 trillion was allocated to debt servicing while the fiscal deficit stands at N13 trillion.

Nigeria’s debt surged to N142 trillion as of the third quarter of 2024, up 5.97 per cent from N134.3 trillion three months earlier.

Nigeria cannot rely on rebasing to present an illusion of progress and risk misleading domestic stakeholders and international observers. The Tinubu administration must address the root causes of inflation rather than masking real economic pain with optimistic numbers.

This means doubling down on structural reforms beginning with massive investments in agriculture. A comprehensive rural roads initiative must complement this effort to facilitate the evacuation of products, access to extension services, and expertise, and boost security in agricultural belts.

It remains a mystery why Tinubu has refused to implement the 150-day food import tariff suspension announced in July 2024 aimed at taming food inflation.

The power sector should be prioritised to reduce manufacturing costs and boost investments, competitiveness, and job creation. Investment in education and health will foster a more productive and skilled workforce needed by emerging industries.

Manufacturers need special consideration for support with targeted tariff waivers for machinery and certain inputs.

The government must ramp up oil production to the COVID-19 era level of 2.2 million bpd to boost forex earnings and ensure crude availability for local refiners to end fuel imports and associated forex leakages. Regulators must ensure that cooling oil prices and the recent naira appreciation benefit consumers at the pump.

Crucially, the government needs to demonstrate fiscal discipline to curb wastage and ensure value for money in the planning and execution of projects.

The N23.4 trillion allocated for 2025 capital projects must be felt conspicuously nationwide.

The National Assembly must rise above self-seeking considerations and closely monitor government expenditure across all MDAs.

Tinubu should take a cue from US President Donald Trump and subsume base politics in favour of government efficiency by streamlining MDAs in line with the Oronsaye Report.

Policymakers should acknowledge the limitations of statistical adjustments and focus on delivering meaningful reforms.

Nigerians deserve a government that addresses economic hardships head-on, rather than one that seeks illusory comfort behind rebased figures.