Nigeria’s inflation rate recorded a dramatic decline, dropping to 24.48% in January 2025 from a staggering 34.80% in December 2024.
The sharp drop followed the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS).
The NBS introduced a new base year of 2025 and a weight reference period of 2024 to provide a more accurate measure of price movements across the economy.
Statistician General, Prince Adeyemi Adeniran, announced the development in Abuja during the launch of the rebased CPI report.
He explained that the new index better reflects current inflationary pressures in the country.
“The rebased CPI is designed to provide a clearer picture of inflation dynamics by updating the basket of goods and services. This ensures more accurate policy-making and economic planning,” Adeniran said.
Despite the significant drop, food prices remained high at 26.08%, indicating persistent pressure on household expenses.
Core inflation, which excludes food and energy prices, stood at 22.59%.
Urban Inflation Outpaces Rural Rates
According to the report, urban inflation was recorded at 26.09%, surpassing rural inflation, which stood at 22.15%.
This highlights the cost of living disparity between urban and rural areas, reflecting higher demand and cost pressures in cities.
The NBS also introduced new indices to track sector-specific inflation trends, providing a more detailed analysis of price movements.
For January 2025, the special indices compared to the base year (2024 = 100) are as follows:
- Farm Produce Inflation: 10.50%
- All Items Less Farm Produce: 10.70%
- Energy Index: 8.90%
- Services Index: 10.41%
- Imported Food Index: 11.47%
Imported Food Prices Remain a Concern
The imported food index at 11.47% suggests that external factors, such as currency fluctuations and supply chain disruptions, continue to impact food prices.
This highlights Nigeria’s vulnerability to global economic shocks, particularly in the food sector.
Additionally, the energy index at 8.90% reflects ongoing cost pressures in fuel and electricity, affecting businesses and households.
Analysts Cautious Despite Positive Trend
Economic analysts have welcomed the decline in inflation, noting that it signals potential economic stability.
However, they cautioned that sustaining the downward trend would require strategic government interventions.
“While the drop in inflation is a positive sign, rising food and energy costs remain a concern. Targeted policies in food production, infrastructure development, and exchange rate management are crucial to maintaining this momentum,” said economist Dr. Tunde Ajayi.
The decline is seen as a result of policy interventions, improved supply chains, and currency adjustments.
Yet, concerns persist about the impact of high food prices on ordinary Nigerians.
Policy Implications and Economic Outlook
The government’s focus on stabilizing the economy through policy reforms has been credited with influencing the inflation rate.
Experts believe that continued investments in agriculture, infrastructure, and foreign exchange management will be necessary to sustain the current trend.
“If the government can maintain this trajectory, it could lead to improved living standards and economic growth. However, inflationary pressures from energy and food prices must be addressed urgently,” noted financial analyst, Chijioke Eze.
Historical Context and Economic Challenges
Nigeria has been grappling with high inflation for several years, primarily driven by food and energy costs.
In December 2024, the inflation rate surged to 34.80%, one of the highest in recent years, driven by festive spending and rising food prices.
The current decline marks a significant shift, offering hope for economic recovery and stability.
However, Nigeria remains vulnerable to external shocks, including currency fluctuations and global commodity prices.