Nigeria’s food inflation drops for first time in four months ahead of rebasing

By Mary Adenike

Nigeria’s annual food inflation rate dropped for the first time since August 2024 ahead of the rebasing of the consumer price index (CPI) expected to be completed this month.

Food inflation fell to 39.84 percent in December from 39.93 percent in the previous month, according to the latest CPI report released by the National Bureau of Statistics (NBS) on Wednesday. The Food inflation rate averaged 39.1 percent last year, up from 27.8 percent in 2023, data compiled by Markets Reporters shows.

The statistical agency also revealed that the country’s headline inflation rate rose to 34.80 percent in December, nearly a 30-year high, from 34.60 percent in November and core inflation quickened to 29.28 percent from 28.75 percent.

“Food prices moderated despite the festive celebrations in December, pushing the year-on-year inflation rate down to 39.84 percent. We believe the moderation in food prices may have been driven by pre-emptive buying, as many consumers likely stocked up in November to avoid anticipated price hikes during the festive period,” analysts at Lagos-based Cordros Research said in a note on Wednesday.

They added that the delayed impact of the harvest season, which typically should have taken effect from October, must have added to the slowdown in food prices. “On the other hand, core inflation increased by 41 basis points to 2.24 percent month-on-month primarily reflecting the impact of seasonal demand following the festive period and elevated energy costs on prices of core items.”

Soaring inflation has been a source of concern in Africa’s most populous nation in recent years, driven by factors including rising food and energy costs, currency depreciation, and supply chain disruptions. 

High inflationary pressures have eroded consumers’ purchasing power, reduced demand and pushed millions of people into the poverty net. According to the World Bank, an estimated 14 million Nigerians fell into poverty in 2024.

The government has implemented various measures to address inflation, including monetary policy tightening and exchange rate adjustments. However, the impact of these measures has been limited so far, and inflation remains a significant challenge for the country.

At a sensitisation workshop on GDP and CPI last week, the NBS revealed that it was rebasing the index used to track household expenditure. “We would have the rebased CPI by the end of January,” Ayo Andrew, its head of price statistics, said. 

In the new methodology, the proposed base year for inflation computation is 2024 as against the current 1998 version. The year was proposed to capture the structural changes that occurred due to the removal of subsidies on foreign exchange and petrol. The items in the CPI basket are also expected to increase from 740 to 960 and the number of divisions from 12 to 13.

Adjusting the weights comes with the “implication that the inflation figure is going to reduce,” said Adeola Adenikinju, president of the Nigerian Economics Society and a former member of the central bank’s monetary policy committee.

“What has been driving inflation in Nigeria has been the food-price inflation, so if food now has a lower weight I won’t be surprised if the figure that will be announced by the NBS will be close to what the budget has,” Adenikinju was quoted by Bloomberg as saying.

President Bola Tinubu aims to reduce the inflation rate to 15% this year but this goal has been dismissed as unrealistic by critics, and the CPI-rebasing exercise has fanned suspicions that it will tactically serve to help meet that objective.