By Hosea Parah, Abuja
The National Bureau of Statistics (NBS) has underscored the critical role of the Consumer Price Index (CPI) in monitoring inflation, emphasizing its importance for understanding Nigeria’s economic trends. The CPI, a key economic tool, tracks the average price changes in a fixed set of goods and services commonly purchased by households, offering valuable insights into shifts in the cost of living.
In its latest report, the NBS explained that the CPI includes essential items such as food, housing, transportation, healthcare, and clothing, selected to reflect the spending habits of typical Nigerian households. These items are assigned specific weights based on their share of household spending. For example, food, which represents a major portion of household budgets, holds a larger weight in the CPI than transportation.
The NBS clarified that the CPI does not measure overall price levels but instead tracks how prices change over time. By comparing current prices with those from a base period, the CPI allows economists and policymakers to better understand evolving price trends, providing a reliable gauge of the cost of living.
The CPI is closely linked to inflation, serving as the primary means of calculating inflation rates. The NBS recently reported a headline inflation rate of 34.8% for December 2024, indicating that prices had increased 34.8% faster than they did in December 2023. It is important to note that a reduction in the inflation rate does not mean that prices are falling, but rather that the rate at which prices are increasing has slowed.
To ensure the CPI remains relevant, the NBS periodically updates the basket of goods and services through a process known as rebasing. This allows the CPI to reflect changes in consumer behavior, incorporating new products like smartphones and removing outdated items from the index.
The NBS is responsible for collecting CPI data from over 10,500 retail outlets across the country each month. This extensive data collection process, conducted during the second and third weeks of every month, ensures that the CPI reflects the latest market conditions and consumer spending patterns.
The inflation data derived from the CPI plays a crucial role in shaping government decisions on interest rates, fiscal policies, and support programs for households affected by rising prices. Businesses rely on CPI data to adjust pricing strategies, wages, and investment plans. Households use the CPI to assess changes in their purchasing power, while investors depend on it to evaluate the real value of their returns.
The NBS concluded that the CPI is an essential tool for measuring inflation, providing critical insights that help individuals, businesses, and policymakers make informed decisions in navigating Nigeria’s dynamic economic environment. Understanding CPI data is crucial for effectively responding to the country’s economic challenges.