By Hosea Parah, Abuja
In November 2023, Nigeria witnessed a further increase in its inflation rate, reaching 28.20% compared to the previous month’s rate of 27.33%. This indicates a rise of 0.87% points in the headline inflation rate. On a year-on-year basis, the inflation rate for November 2023 was 6.73% points higher than the rate recorded in November 2022, which stood at 21.47%.
The Consumer Price Index (CPI) is used to measure the average change over time in the prices of goods and services consumed by people for day-to-day living. The construction of the CPI involves a combination of economic theory, sampling, and statistical techniques, utilizing data from various surveys to create a weighted measure of average price changes in the Nigerian economy.
The CPI is based on a market basket of goods and services, and each month, 10,534 informants from across the country provide price data for the computation of the index. Currently, the market basket includes 740 goods and services. The calculation process involves collecting prices for each item, calculating the basic index for each commodity, and using the Laspeyres formula to compute an aggregated index for each class.
The inflation rate is classified into various categories, including the Country Composite Index, Urban National Index, Rural National Index, and Combined Urban and Rural State Composite Index. The survey methodology generates 3774 all-items indices for all states and the Federal Capital Territory (FCT).
Breaking down the November 2023 inflation rate further, the urban inflation rate was 30.21%, showing an increase of 8.13% points compared to the same period in 2022. The rural inflation rate stood at 26.43%, marking a 5.55% point increase year-on-year. Food inflation was particularly significant, reaching 32.84% on a year-on-year basis, primarily driven by price increases in bread and cereals, oil and fat, potatoes, yam and other tubers, fish, fruit, meat, vegetables, and coffee, tea, and cocoa.
The core inflation rate, which excludes volatile items such as food and energy, stood at 22.38% in November 2023 on a year-on-year basis, showing a 4.39% increase compared to the previous year. The highest increases in core inflation were observed in prices of passenger transport by road, medical services, passenger transport by air, housing rentals, pharmaceutical products, and accommodation services.
It is important to note that interstate comparisons of consumption baskets may be misleading due to variations in expenditure patterns across states and locations.
Nigeria’s inflation rate continued to rise in November 2023, with significant increases in urban, rural, food, and core inflation. These trends highlight the challenges faced by the Nigerian economy and the need for effective measures to manage inflationary pressures and stabilize prices for the benefit of the population.