Nigeria’s inflation rate hasÂdroppedÂfor the first time in several months. According to the latest Consumer Price Index (CPI) report from the National Bureau of Statistics (NBS), inflation fell from 34.8% in December 2024 to 24.5% in January 2025.
Yay! So why did inflation reduce this much?
The National Bureau of Statistics (NBS) is changing how inflation is calculated.
One of the biggest changes has been rebasing the Consumer Price Index (CPI), the NBS tool to track inflation. The NBS has now shifted to using 2024 as the new base year. This means the starting point for measuring price changes has been updated to match today’s economic situation. It’s important because until now, the CPI has been based on data from 2009 when consumer habits and market conditions were quite different.
Another major change with this update is the inflation basket. Previously, the NBS measured inflation based on 740 items, but now that number has jumped to 934 goods and services. This expansion helps paint a complete picture of how prices change across various economic sectors. However, the new method gives less weight to food prices—the biggest driver of inflation—shrinking its share of the inflation basket from 51.8% to 40.1%. This adjustment means that even if food prices continue to rise sharply, their impact on the overall inflation rate will appear smaller.
The NBS also shifted focus towards categories that more accurately represent what people are actually spending on today. For instance, transportation, healthcare, and education have received more attention since these have become more significant parts of household budgets. With more weight placed on these areas, the inflation numbers aim to match everyday Nigerian realities better.
As a result of these changes, the inflation rate is now dropping noticeably. According to the NBS, the updated methodology offers a more transparent and accurate picture of price changes in the economy.
Are prices going down in the market?Â
Not necessarily. While inflation has slowed, it doesn’t mean market prices will drop significantly. The rebasing of inflation calculations is a shift in measurement, not an indication of falling prices. It aims to reflect current consumer spending more accurately but doesn’t reverse price trends.
For example, even though overall food inflation has declined, staples like Garri, rice, or cooking oil may remain expensive. Prices are influenced by ongoing challenges such as energy costs, transportation, and supply chain disruptions, which continue to drive up expenses.
For most Nigerians, food accounts for a large share of their income—much more than the 40.1% weighting now assigned in the inflation calculation. If food prices go up by 24% but the price of other elements in the CPI basket stays the same, inflation looks tamer, but only on paper. That’s why protecting your purchasing power and making smart financial choices remain essential.
The answer is investing.
When inflation rises, the value of your savings can shrink. But, by investing in assets that tend to perform well over time, like fixed income deposits, stocks, real estate, and other smart investment opportunities, you can protect your savings and grow your wealth.
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