Thread by @yinkanubi

It is no longer news that headline inflation in Nigeria increased from 17.33% in February to 18.17% in March. I know many are feeling very concerned right now (we should be tbh) but relax, it is not without remedy. Fix the food crisis and the inflation rate will come down.

I would have been more concerned if the rise in inflation is linked more to imported inflation than local food prices. That is obviously not the case even with imported food index in the CPI, meaning it's within our control to do the necessary to stem the tide of rising inflation

That said, I have another concern, one that I believe @nigerianstat should be looking at. It has to do with our CPI weight. At the moment, the CPI basket in Nigeria is weighted based on a 2009 revision of the 2003/2004 National Standard of Living Survey. i.e. 2009 is the base yr.

As you can see from the the COICOP classification attached, Food represents more than 50% of total weight. It's why I know that once we fix the food crisis, inflation will come down. But regardless, I am of the opinion that the current weights are outdated and in need of review.

Last July 2020, @nigerianstat released the National Living Standard Survey 2018-19 which among other objectives usually forms the basis to update the weights and determine the basket for the national Consumer Price Index (CPI). I had thought that the weights will be reviewed.

But it appears that NBS continues to use CPI weight and basket based on the NLSS - 2003/2004 as per November 2009 revaluation. According to @Nairametrics "This raises concerns about the aptness of the estimations of consumption preferences and share of..

....commodities in the household budget generated from the survey. Notably, the surge in the share of telecoms, recreation and culture & entertainment-related expenditures in the overall household expenditure point to a new pattern in the consumption & expenditure of Nigerians."

Globally, countries review their CPI basket periodically. In the same period we've maintained ours, South Africa has reviewed their CPI Basket 3 times. The US annually while Canada does it bi-annually. No doubt food will still maintain the highest weight even after review but...

...I think, we should let the CPI basket reflect the realities of changes in consumption and expenditure patterns over the last 12 years.

Of course a lot depends on funding. We simply can't compare the funding available to the NBS to their counterparts in South Africa & the US.

In conclusion, given the importance of inflation as a macroeconomic indicator and the critical role its plays in decisions made by internal and external stakeholders regarding an economy, it is very important that we make sure the NBS gets the funding it needs to do its job.