EDITORIAL: Monetary policy and making sense of NBS’ rebased CPI numbers

In October 2024, when the National Bureau of Statistics (NBS) announced its plan to rebase both the Gross Domestic Product (GDP) and Consumer Price Index (CPI), there was a palpable sense of relief across Nigeria. Both measures of economic performance were outdated in terms of their components and the contributions to their respective data series. In other regions, it is standard practice to update these data series every five years.

Yesterday, the National Bureau of Statistics finally published the new CPI data series. Besides moving the price reference period (base year) from 2009 to 2024, the NBS also revised both the composition of the consumer basket of goods and services and the respective weights assigned to the components. The most important effect of all these changes is that the headline inflation figure for January came in at 24.48 per cent. But does this domestic inflation print lend itself to comparison with the 29.90 per cent published for January 2024 (if the comparison is made with the same time last year), or the 34.80 per cent published for December last year, as most newspaper headlines would have us believe?

On paper, a lower inflation rate between comparable periods, especially one as severe as the new numbers suggest when compared to the old one, would advise that the Monetary Policy Committee (MPC) seriously consider cutting its monetary policy rate (MPR), which was set at 27.5 per cent at its last meeting in November 2024. Already, businesses have indicated the higher retail money market rates, arising from the MPR, as a major driver of rising business costs. The problem with a mechanical lowering of the rate, however, is that taken alone, it could obscure far more subtle underlying effects and relationships.

A more useful device for public and private decision-makers and for the general economy’s allocative efficiency would have the NBS publish what the headline inflation rate would have been last month under the old and new series. This is so because, from the document “Consumer Price Index (CPI) Rebasing – Key Highlights” published by the NBS to accompany the new index, we know that whilst the basket for the old index had 740 varieties of product, the new index has 934 varieties of product. In other words, the indices are not measuring the same things, which makes comparison difficult. Inevitably, for the sake of policymakers across the country, the NBS would need to keep publishing both series side-by-side until at least the first quarter of next year.

There is also the small matter of the sensitisation of the public. And this is not so much the consequence of the newspaper headlines that accompanied the first data point in the new series. In April 2023, the NBS similarly released a new unemployment series, which appeared to flatter the incumbent administration.

Wrongfully interpreted, the new inflation series is likely to have the same effect. With any luck, the NBS’s rebasing of the country’s output numbers will result in a much bigger economy – again suggesting that we are witnessing the benign effects of public policy. For context, the National Assembly (NASS) had estimated the N13 trillion deficit of the 2025 federal budget at 1.52 per cent of the gross domestic product (GDP), which teases a rebased GDP of N860 trillion. According to the NBS, Nigeria’s 2023 GDP was N234 trillion.

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These numbers, alas, do not change how the mass of the people is affected by government policies and market realities, in their daily lives. Combined, however, they create the sense that these numbers are manipulable (on behalf of the state). Across the world, we are witnessing the harmful effects on democracies from the cynicism and scepticism that this kind of thinking feeds. Ours, unfortunately, is a much younger democracy – and so much more vulnerable to harm from an increasingly sceptical polis.

In the light of this, and given the imminent announcement of decisions of the MPC, the requirement to refrain from, first, doing any harm would have the MPC desist from tinkering with its benchmark policy rate until we have better clarity on the pace and trajectory of the general domestic price level.