Decline in inflation rate doesn’t mean reduction in prices, says Muda Yusuf

Muda Yusuf, the chief executive officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), has cautioned against celebrating the recent drop in the inflation rate, stressing that high prices remain a significant challenge.

The National Bureau of Statistics (NBS) on Tuesday reported that Nigeria’s inflation rate dropped from 34.8 percent in December 2024 to 24.48 percent in January after rebasing the consumer price index (CPI).

However, Yusuf explained that the drop in food inflation from 39.8 percent to 26.08 percent and the decline in core inflation from 29.28 percent to 22.59 percent were expected due to the review of the computation base year from 2009 to 2024.

“There is additionally a strong base effect on the inflation figures given the high inflation regime in 2024, which had a considerable effect on the year-on-year inflation outcomes,” the CEO said.

“Besides, transaction demand in December 2024 was typically much more intense because of the festivities while the spending momentum in January was predictably much slower because of lower disposable incomes following intense spending in the previous month.

“These are some of the explanatory factors for the sharp deceleration in the inflation numbers in January 2025.”

He emphasised that a drastic reduction in inflation figures does not mean a reduction in the price level.

“Inflation reduction simply means a reduction in the rate of increase in the general price level, not a reduction in price,” he said.

“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.”

He expressed hope that the government would recalibrate its strategies to address major cost drivers.

Yusuf added that households and firms remain concerned about high energy costs, the strength of the naira, high interest rates, the cost of imports, transportation costs, and insecurity.