Nigeria’s inflation index severely outdated, says IMF

The International Monetary Fund (IMF) says the weights used by the National Bureau of Statistics (NBS) to calculate the monthly consumer price index (CPI) are “severely outdated”.

The CPI is used to measure inflation by tracking the changes over time in the prices paid by consumers for a basket of goods and services.

The basket’s composition and weighting are usually based on surveys of household or family expenditure habits.

In January, Nigeria’s inflation rate surged to 21.82 percent, up from 21.34 percent in the previous month.

In its recently released 2022 Article IV consultation report on Nigeria, the IMF said the NBS inflation index does not provide a true representation of current expenditure patterns.

It warned that outdated weights can lead to bias in the inflation index.

“The official monthly consumer price index (CPI), a composite of urban and rural
price data, is available on a timely basis. However, the index weights and basket are based on expenditures derived from the 2003/04 National Consumer Expenditure Survey,” IMF said.

“The weights are severely outdated and are not representative of current expenditure patterns. Outdated weights can introduce a bias into the index.”

The international financial organisation urged the NBS to use new weights from the 2018 National Household Living Standards Survey rather than from the 2003/04 National Consumer Expenditure Survey.

It said the collection of an updated producer price index is ongoing but the funding for it is uncertain.

The IMF assured that it would support Nigeria in updating its CPI.

“The update of the CPI—using new weights from the 2018 National Household Livings Standards Survey—is still ongoing,” the organisation said.

“Compilation of an updated producer price
index is ongoing but funding for the survey is uncertain.

“Africa Regional Technical Assistance Center West 2 (AFW2) plans to provide additional
technical assistance to support the CPI update and improvements to Nigeria’s price statistics.”