Rebasing: Statistical Illusion Or Reality?

Nigeria’s recent rebasing of the Consumer Price Index (CPI) has dramatically altered the inflation landscape. A headline inflation rate that once stood at a harrowing 34.8 per cent has now been recalibrated to 24.5 per cent, a sharp decline that, at first glance, suggests substantial economic relief. Yet, to assume that this statistical adjustment signifies a real decline in inflationary pressures would be both naïve and economically unsound. The fundamental economic conditions that fueled the initial surge in inflation remain largely unchanged. A methodological revision, however necessary for accuracy, does not equate to a transformation of the real economy.
Rebasing, undertaken by the National Bureau of Statistics (NBS), is a routine statistical exercise meant to ensure that inflation calculations reflect contemporary consumption patterns. The previous base year had become outdated, failing to account for shifts in spending habits, technological advancements, and sectoral changes. Thus, 2023 was selected as the new reference period, offering a more precise measurement of inflation’s impact on Nigerian households. But the act of rebasing is merely a technical recalibration—it does not make food, transportation, or rent any cheaper overnight. The lived reality of Nigerians, who continue to grapple with high costs and stagnant wages, remains unaltered by these revised statistics.
Against this backdrop, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has chosen a conservative approach, maintaining key policy rates despite the lower inflation figures. The Monetary Policy Rate (MPR) stays at 27.50 per cent, with the Cash Reserve Ratio (CRR) held at 50 per cent for Deposit Money Banks and 16 per cent for Merchant Banks. The Liquidity Ratio remains unchanged at 30 per ceny, while the Asymmetric Corridor remains at +500/-100 basis points around the MPR. This decision reflects an awareness that, while the inflation rate on paper has declined, economic fundamentals remain fragile.
Notably, the month-on-month inflation rate has surged to 10.7 per cent, a red flag that cannot be ignored. If this trajectory persists, annualised inflation will likely exceed the newly reported 24.5 per cent, undermining any perception of stability. This phenomenon aligns with the warning issued by Irving Fisher, whose work on the relationship between inflation expectations and real interest rates underscores the dangers of policy complacency in the face of persistent price pressures. A decline in the headline inflation figure, if not supported by actual improvements in purchasing power and supply dynamics, risks being nothing more than a statistical illusion.
The MPC’s cautious stance is also a tacit acknowledgment that monetary policy alone cannot resolve Nigeria’s inflationary woes. Structural factors—such as food supply bottlenecks, exchange rate volatility, and fiscal imbalances—continue to exert upward pressure on prices. The Fischer Effect reminds us that nominal interest rates will eventually adjust to reflect real inflationary expectations. If the underlying drivers of inflation remain unaddressed, policy rates will need to remain high for longer, stifling credit availability and economic growth.
A parallel development looms on the horizon: the impending rebasing of Nigeria’s Gross Domestic Product (GDP). The last such exercise, conducted in 2014, led to the revelation that Nigeria’s economy was far larger and more diversified than previously estimated. The inclusion of emerging sectors such as telecommunications, entertainment, and e-commerce reshaped perceptions of economic size and structure. The forthcoming GDP rebasing is expected to further incorporate industries that have expanded significantly over the past decade, such as fintech, digital services, and the maritime economy.
However, a larger GDP is not an automatic panacea for Nigeria’s economic challenges. Joseph Stiglitz, a staunch critic of GDP as a measure of economic well-being, has long argued that headline growth figures can be misleading if they fail to capture income distribution and quality-of-life indicators. If rebasing significantly expands Nigeria’s GDP, it will alter key macroeconomic ratios, such as debt-to-GDP and fiscal deficit percentages, potentially presenting a more favourable fiscal position. Yet, this statistical improvement does not inherently translate into better living conditions for the average Nigerian. Without corresponding increases in real wages, employment opportunities, and public infrastructure investment, a higher GDP will remain an abstract economic construct, detached from everyday reality.
The policy implications of both CPI and GDP rebasing must be considered with a critical lens. The Nigerian government, buoyed by a potentially lower inflation rate and a larger GDP, may be tempted to scale back aggressive policy interventions or justify increased borrowing. But economic history warns against such miscalculations. Friedrich Hayek cautioned against overreliance on aggregated economic indicators that fail to reflect market distortions and inefficiencies. A rebased GDP might create the illusion of improved fiscal sustainability, leading to policy complacency, even as underlying economic vulnerabilities persist.
Furthermore, if the revised GDP figures depict a more prosperous economy, international lenders and multilateral institutions may reassess Nigeria’s eligibility for concessional financing. This could inadvertently tighten external financing conditions at a time when Nigeria still faces significant debt-servicing challenges. Policymakers must therefore resist the temptation to interpret statistical recalibrations as signs of substantive economic transformation. The credibility of economic management depends not on revised numbers but on the implementation of policies that drive sustainable growth, reduce inequality, and stabilise the macroeconomic environment.
Nigeria’s inflation rebasing and upcoming GDP revision are necessary exercises in statistical modernization. They provide a clearer picture of economic realities, aligning macroeconomic data with contemporary conditions. However, they do not, by themselves, improve purchasing power, reduce poverty, or stimulate industrial production. The real challenge lies in ensuring that economic policies reflect the lived experiences of Nigerians rather than simply painting a more favourable statistical picture. Pragmatism, rather than optimism based on revised figures, must guide Nigeria’s next steps.