By Isiaq Ajibola
It is indeed a challenging time for Nigerians to believe any positive statistical data that relates to income, prices, and standard of living due to the hardship that is being experienced by the citizens at this time.
When recently the National Bureau of Statistics ( NBS) released the report of the rebased consumer price index(CPI ), which indicated a reduction in inflation from 34.5% in Dec 2024 to about 24% in January 2025, it was reasonably expected that there would be a backslash.
Expectedly, this came even from informed writers, commentators and financial analysts who found it difficult to unwoven the tie around the seeming “good” figures compared to the reality of a rising “cost of living” in Nigeria today.
Interestingly, this conundrum that analysts found themselves in is not peculiar to Nigeria. It has not been different from the
experience of most other countries where rebasing was carried out at one time or the other in their economy.
While GDP and CPI rebasing may have aimed at improving data accuracy in a country, pundits often misinterpret, politicise, or make populist comments to look good in the “eye of the public”.
The misinterpretation arises from the myth that GDP growth or inflation figures are linked with economic hardship. Questions such as, “If GDP has increased, why are people still poor?”, ” If the inflation rate has declined, why are prices still high?”, are often asked.
Believability in statistical figures in other countries, starting from our neighbours, Ghana is no different.
In 2018, Ghana rebased its GDP, which led to a 24.6% rise in the size of its GDP. In the previous rebased figure of 2013, it increased the size of the economy by 60%. The opposition and civil society questioned whether the growth was real or politically motivated. Critics argued that the new data made Ghana ineligible for concessional loans despite persistent economic struggles.
Inflation calculations were also challenged, with some believing they underreported the actual cost of living.
The same thing in Kenya in 2014 GDP Rebasing.
After the rebasing, Kenya’s GDP increased by 25%, leading to its classification as a lower-middle-income country.
The opposition claimed the new numbers were misleading and did not reflect job losses and high living costs.
Many Kenyans felt the GDP rebasing was a “paper exercise” that did not improve their economic conditions.
A similar thing happened in South Africa in their 2021 GDP rebasing
which showed an 11% increase in the size of the economy. Despite the GDP rise, South Africans continued to experience high unemployment and declining household incomes. The government was accused of using statistical adjustments to mask economic mismanagement. The rebasing coincided with political instability, fueling suspicions about the timing.
In far-away China, GDP growth figures have been repeatedly accused of an overstatement. Independent writers claim China’s real growth rate is lower than what is officially reported. Western analysts particularly often argue that the government adjusts numbers to meet political goals. In fact, there have been reports of local governments inflating economic data to receive more funding from Beijing.
In 2013, the U.S. Bureau of Economic Analysis (BEA) changed how it calculated GDP, incorporating Intellectual Property (IP), Research & Development (R&D), and artistic works; movies, software, and patents. This led to an increase in GDP of about 3%, which was $560 billion overnight.
People found it unbelievable. They said that the economy had not actually grown overnight, yet GDP figures suddenly looked much bigger. Many critics argued that the figures were overstated because intellectual property value was intangible and did not directly translate to job creation or higher wages.
The reality, however, was that the GDP increase was technically correct because a new methodology was adopted, but it did not mean that Americans were richer or had better jobs.
Why the seeming distrust?
The reality is that GDP measures economic output, not how wealth is distributed in a society. Growth in GDP does not mean automatic improvement in living standards for an individual.
For example, even though Nigeria’s GDP rebase revealed a larger economy in 2014, poverty and unemployment remained high due to problems related to fundamental problems of corruption, poor infrastructure, reliance on oil, etc which did not allow for equitable
distribution of wealth.
The same thing applies to inflation derived from the consumer price index ( CPI). Inflation statistics are normally based on average prices, which change from time to time in the whole country in a particular period compared to any previous period. While some areas may experience higher price hikes due to market instability, transportation fluctuations, etc, others may experience lead to lower prices in others.
For example, food inflation may be higher in urban areas than the official inflation figure due to other things like supply and demand, import costs, and supply chain disruptions in the distribution chain.
In the recently rebased CPI, certain factors led to the lower average price that generated the inflation figure that we saw. They include essentially the following:
1. Update of the CPI base year
The CPI base year was updated from 2009 to 2024.
An outdated base year often leads to inaccuracies because it does not reflect current inflationary pressure, technological advancements, or changes in consumer behaviour.
The updated base year provides a more relevant benchmark for measuring price changes, which contributed to a more realistic inflation figure.
2. Changes in the basket of goods and services.
Closely related to the first point above was the change in the composition of the CPI basket, which was revised to better reflect the current consumption pattern.
Outdated or less-consumed products like black and white TVs, Nokia 3310, Recharge cards, Toilet soap jo,y, etc were removed, while more relevant goods and services like technological products and modern services were included.
According to NBS, the new basket contains over 400 new products and about 500 old ones.
This adjustment helps ensure that inflation calculations accurately represent actual spending patterns, potentially leading to more accurate inflation figures.
3. Reweighting of basket components.
Furthermore, each item in the CPI basket is assigned a weight based on its importance in household spending.
The rebasing process led to a reweighting of items like education, transportation, restaurants, and accommodation, which shifted emphasis away from goods and services with high price volatility. Reduced weighting on volatile items, such as certain food products, could have contributed to the observed decline in inflation.
More importantly, the major factor responsible for the decline in the inflation figure is the BASE YEAR, which was brought closer to the current period.
Therefore, comparing the rebased inflation figure of January 2025 to that of Dec 2024 is like comparing an apple with an orange, which, surprisingly, a well-known financial analyst did during a recent lecture presentation in Lagos.
The important point to note here is that the fall in inflation figures in the rebased CPI does not necessarily mean prices are dropping—it reflects a more updated and accurate measure of how inflation is calculated.
No doubt, the most potent weapon for destroying statistical figures in any country is the political interpretation of it.
For example, after Nigeria’s GDP rebasing in 2014, critics argued that it was a political calculation for the Jonathan government to win the election in the 2015 elections, whereas this was wrong as the methodology was validated by many state holders including international bodies like IMF and WorldBank.
It was later found out that the Nigerian economy indeed expanded due to the activities of retailing, which accounted for bigger GDP when the rebased report was released.
The rapid expansion of supermarkets and retail outlets like the “H- Medix Supermarket” in Abuja would today testify to the fact that a big chunk of the economy was underreported pre-2014 rebase year.
In recent times, the only time national statistical figures were not attacked in Nigeria was when NBS reported that about 130 million people were multi-dimensionally poor in Nigeria. This was good music to the ears of analysts as the data was extensively quoted.
The report was released some weeks before the presidential election in 2023 to the credit of the Government of President Muhammadu Buhari. This enabled the opposition to launch some attacks on the government, which had promised to lift 100m Nigerians out of poverty. The level of distrust in the figures of multi- dimentionally poor then was almost zero as the report was very popular.
Similarly, there was a time when the growth rate of Nigeria was about 7% between 2003- 2010, and it was said that our debt had been wiped off; people believed the statistical figures. Yet there was massive unemployment, poverty, deprivation, and indeed malnutrition in the land.
Essentially, for GDP rebasing to be impactful, it must be followed by policies to create jobs and reduce inequality.
The same thing with inflation figures. For the people to benefit, the government must combine statistical rebasing with policies that stabilize prices or support low-income people. A large GDP does not automatically improve infrastructure, healthcare, or social services. Rebased data can only inform government policies but can’t change them.
Using GDP and CPI rebasing for real change entails a more frequent rebasing exercise.
Nigeria is often compared with South Africa in GDP & CPI rebasing. The fact is that South Africa rebases more frequently with an interval of 5–7 years. This would enable economic policies to activate investment and other initiatives in newly recognized growth sectors in the economy, which would, in turn, expand job creation and strengthen social programmes that can reduce the impact of inflation.
_Ajibola, an economist and former Managing Director of Daily Trust, lives in Abuja_