Nigeria's inflation rate has taken an unexpected turn, decelerating in January 2025 following the implementation of a rebased Consumer Price Index (CPI) by the National Bureau of Statistics (NBS). The new methodology has reduced the weight of food in the inflation calculation from 51.8% to 40.1%, resulting in a headline inflation rate of 24.8%, down from 34.8% in December 2024.

Prior to the rebasing, analysts had projected Nigeria's inflation to remain elevated in early 2025, with expectations of a gradual decline later in the year. However, the revised CPI structure has introduced new variables that may reshape inflation dynamics. While food prices continued to climb due to supply chain disruptions and naira depreciation, the reduced weighting muted their impact on the overall inflation figure. Food inflation stood at 24.08%, down from 39.84% recorded in December 2024.

The rebasing has also shifted the contribution of other expenditure categories, potentially smoothing out some of the inflationary spikes seen in previous months. However, structural inflation risks persist, particularly in energy and transport costs. Higher diesel prices and potential adjustments to electricity tariffs remain key concerns for businesses and households alike.

Despite the lower headline inflation, analysts warn that the decline may not fully reflect price pressures on consumers, particularly for essential goods. With the rebased CPI now in effect, future inflation readings will offer a clearer picture of how Nigeria's inflationary landscape is evolving.

The Monetary Policy Committee (MPC) is expected to take a measured approach in response to the new inflation numbers. While a slowdown in inflation could provide some relief, uncertainties around food inflation and currency volatility may still keep policymakers on guard.

The implications of the rebased CPI are far-reaching, and its impact on Nigeria's economy will be closely monitored in the coming months. As the country navigates its inflationary challenges, the revised CPI structure may provide a more accurate reflection of the country's economic realities.