The International Monetary Fund (IMF) has called for an update to the index weights and baskets used by the National Bureau of Statistics (NBS) for the monthly consumer price index in Nigeria.
The IMF highlighted that the current index does not provide an accurate reflection of how people are spending their money.
In a recent report titled “Nigeria: 2022 Article IV Consultation-Press Release, Staff Report, and Statement by the Executive Director for Nigeria,” the IMF recommended that the NBS incorporate new weights from the 2018 National Household Livings Standards, replacing the outdated 2003/04 National Consumer Expenditure Survey.
The IMF warned that the NBS index could be distorted if it continued to use outdated data.
The IMF also noted that efforts were underway to update the producer price index, although it was unclear how this would be financed.
The report further highlighted that the second African Regional Technical Assistance Centre in West Africa would help Nigeria improve and update the CPI.
The monthly consumer price index, or CPI, is an official composite of urban and rural price data, which is available on a timely basis.
However, the index weights and baskets are based on expenditures derived from the 2003/04 National Consumer Expenditure Survey, which is no longer relevant.
The need for an update to the CPI in Nigeria reflects the changing spending habits of Nigerians over the past two decades.
The introduction of new technologies, changes in consumer preferences, and shifts in market dynamics have led to changes in the way people spend their money.
The IMF’s call for an update to the CPI is expected to improve the accuracy of inflation data, which is critical to the country’s economic planning and policymaking.
” The weights are severely outdated and are not representative of current expenditure patterns. Outdated weights can introduce a bias into the index.
“The update of the CPI—using new weights from the 2018 National Household Livings Standards Survey—is ongoing.
” The compilation of an updated producer price index is ongoing but funding for the survey is uncertain. AFW2 plans to provide additional technical assistance to support the CPI update and improvements to Nigeria’s price statistics.”
In its most recent “Consumer Price Index” for January 2023, the NBS said that the headline inflation rate in January 2023 was 21.82%, which was higher than the headline inflation rate in December 2022, which was 21.342%.
The inflation rate in January 2023 is 21.82 per cent, which is 6.22 percentage points higher than in January 2022, which was 15.60 per cent.
According to the NBS, the rise in inflation in January was caused by higher prices for bread and cereal, potatoes, yam and tubers, vegetables, meat, and rent.