January Inflation Drop: Experts say it’s not yet Uhuru

• Experts say January inflation drop is not yet Uhuru
• The LCCI and CPPE say inflation drop doesn’t necessarily translate to lower prices or improved living standards
• Others say the drop could influence capital market investment decisions

The National Bureau of Statistics (NBS), on Tuesday, February 18, said Nigeria’s headline inflation dropped to 24.48 per cent in January 2025 following the rebasing of the Consumer Price Index (CPI).

The NBS said the decline in the inflation rate from 34.80 per cent in December 2024 was driven by the prices of food, beverages, clothing, and footwear items.

It also said food inflation was 26.08 per cent year-on-year for January 2025, a decrease from the 39.84 per cent recorded in December 2024.

Urban inflation stood at 26.09 per cent, while rural inflation stood at 22.15 per cent in January 2025.

Experts are however reacting to the inflation rate data, saying the drop in the inflation rate should be celebrated cautiously.

CPPE says inflation drop doesn’t necessarily translate to lower prices

In a statement on Tuesday, February 18, the Centre for the Promotion of Private Enterprise (CPPE) cautioned that the drastic reduction in inflation figures following the rebasing of the CPI does not necessarily translate to lower prices of goods and services.

The CEO of CPPE, Dr Muda Yusuf, stressed that despite the new inflation metrics, the reality of high prices remains a significant challenge for businesses and households alike.

“It is important to clarify that a drastic reduction in inflation figures is not tantamount to a reduction in the price level.

“Inflation reduction means a reduction in the rate of increase in the general price level, not a price reduction. The drastic deceleration in inflation should, therefore, be cautiously celebrated.

“The reality of high prices has not changed and remains a major factor in the cost of doing business, cost of living, and poverty equation in the country.

“Households and firms are still concerned about high energy costs, the strength of the naira, high interest rates, cost of imports, transportation costs, and insecurity,” he stated.

Yusuf urged policymakers to focus on strategies that will lead to actual price moderation rather than merely celebrating reduced inflation rates.

He, however, acknowledged that there are early signs of price moderation in key sectors.

“What businesses and households desire at this time is a reduction in the general price level from the incredibly high levels in 2024 to a substantial moderation in 2025, which is defined in technical parlance as disinflation.

 “The good news, however, is that we are beginning to see indications of such reductions in PMS, diesel, some food items, and pharmaceutical products. It is hoped that this trajectory will be sustained in the course of the year,” he added.

Inflation drop doesn’t automatically improve living standards – LCCI

The Lagos Chamber Of Commerce and Industry (LCCI) says though the drop in the inflation rate may seem positive, it “does not automatically improve living standards.”

The Director-General of LCCI, Dr Chinyere Almona, said the rebased CPI did not mean any price decline but an update in the weight of different goods and services in the inflation basket to better reflect current consumption patterns.

“The previous method likely overemphasised food inflation, while the new approach incorporates updated economic data and adjusted weightings. This difference does not indicate a sharp fall in prices but a revised way of calculating inflation.

“Prices are still rising, wages remain stagnant, and unemployment is high, keeping real incomes under pressure. The rebased inflation rate only reflects a different measurement, not an actual drop in prices,” she said.

Almona called on the government to implement targeted interventions that will address the root drivers of inflation and lead to a real reduction in essential costs like food and transportation, which remain high.

“One key priority is tackling food inflation, which accounts for over 50 per cent of price increases. Policies should focus on boosting agricultural productivity, reducing post-harvest losses, and improving transportation and storage infrastructure to ensure food affordability,” she added.

CPI rebasing could influence capital market investment decisions

Other experts say the CPI rebasing, which led to a drop in inflation figures may influence investment decisions in the capital market, including a shift from debt instruments to equities.

The Chief Executive Officer of Highcap Securities, David Adonri, said the drastic reduction in the weighting of food to arrive at the revised inflation figure is contentious.

He said the drop in inflation figures may likely upend investment trends in the capital market as investors may choose equities over debt instruments.

Adonri said, “The market is still studying the situation because it sounds like a motion without movement. The colossal reduction in the weighting of food to arrive at the new figure is contentious.

“Even before now, inflation figures did not impact equities. However, it increased the yield on debt but not proportionately because up till last year there was a negative return on debt.

“Due to the excessively high yield on debt before this rebasing, several foreign portfolio investments flowed into debt.

“Consequently, a drop in debt yield can cause an exodus from public debt, which may affect the success of sovereign debt issues. Investors may therefore decide to be more active in equities to the extent that sovereign risk permits.”

‘Rebasing won’t impact foreign inflows’

In his comments, the Chief Economist/Managing Editor of Proshare, Teslim Shitta-Bey, said foreign inflows would not be impacted by the CPI rebasing, adding that there is no significant shift in the economy.

Shitta-Bey, however, said Nigeria should have rebased earlier and keep with the changes in CPI and Gross Domestic Product (GDP).

He noted, “We knew there would be rebasing and a reduction in CPI. We already projected the inflation adjustment, and we were not far off. What we are looking at is the GDP. Nigeria should have rebased much earlier.

“Investors have already made decisions in fixed income, and it’s not about the immediate impact but the trend. The adjustment to inflation is likely to have a short-term impact on money market rates.”

CPI rebasing: Analysts reluctant to forecast January inflation

Meanwhile, TheRadar earlier reported that due to the delay in the release of the rebased Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS), analysts were cautious and reluctant to forecast the January 2025 inflation figures.

Analysts note that without a clear figure from the revised CPI, it will be difficult and nearly impossible to make accurate predictions about inflation.