IMF, experts fault NBS methodology on Nigeria’s inflation rate


THE International Monetary Fund (IMF) believes Nigeria’s National Bureau of Statistics (NBS) has not been using the right methodology in measuring the country’s consumer price index (CPI).

The NBS, in its latest report on the inflation rate for January 2023, stated that the figure rose to 21.82 per cent, from the December 2022 figure of 21.34 per cent.

But in a report titled, ‘Nigeria: 2022 Article IV Consultation’, the IMF said the NBS was using the 2003/2004 National Consumer Expenditure Survey (NCES) to measure the CPI or the inflation rate, instead of the 2018 National Household Livings Standards, which would have measured the rate appropriately.

The Fund regarded the 2003/2004 NCES as outdated and affecting the monthly NBS inflation rate measurement.

The NCES is an index basket that includes prices of household goods, foods and other items.

According to the IMF, the inflation rate released by the Bureau did not reflect the reality in the Nigerian market, saying the use of the 2018 National Household Livings Standards would make the rate more realistic.

In its report that covered the month of January 2023, IMF urged the NBS to update its price basket or methodology to capture market realities correctly.

The report read, “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 baskets are based on expenditures derived from the 2003/04 National Consumer Expenditure Survey. The weights are severely outdated and are not representative of current expenditure patterns. Outdated weights can introduce a bias into the index.

“The update of the CPI — using new weights from the 2018 National Household Livings Standards Survey— is still ongoing. The compilation of an updated producer price index is ongoing, but funding for the survey is uncertain. IMF plans to provide additional technical assistance to support the CPI update and improvements to Nigeria’s price statistics.”

Some Nigerian economists, agreeing with the IMF, also faulted the NBS CPI inflation calculation methodology.

An economist and chief executive officer of Financial Derivatives, Bismarck Rewane, questioning the integrity of the current measurement basket of the NBS, described it as “outdated.”

Rewane said, “The fact that the inflation basket is supposed to be reviewed every five years and it has not been done is a major concern. Your behavioural patterns, demography, and life expectancy changes per time. All these are factored in.”

He stressed the importance of using the correct basket for measuring Nigeria’s inflation, noting that it was last reviewed in 2004.

“The last time we tweeked the basket was in 2004, quite frankly. Going by the five year cycle, we are in for a third review. What we seek to do in financial derivatives is to look at the baskets and try to rudimentarily alter it to reflect the right methodology.

“For instance, last year we used the basket of the NBS and it came out at 18.6 per cent. Our projection was that it was going to come out a little above 19 per cent, using the same NBS basket. When we used our own rudimentary basket, it came out at 45.6 per cent, a big difference,” he added.

A development economist, Kelvin Emmanuel, told The ICIR that the Nigerian inflation figure could be as high as over 40 per cent if the right methodology was utilised.

Emmanuel said, “I have always complained about the way the NBS calculates inflation and how it’s not accurate. The reality is that the NBS is using the National Economic Income Survey of 2004, despite the fact that the spending patterns of households have changed since then.”

He said that some other Statistics bureaux and global central banks are using the National Income Survey of 2018.

“This means that what the NBS is doing is wrong. There are other matrix to examine, if you look at the pending patterns of families, and it goes beyond food and transport. The National Living Standard Survey already provides the matrix they would use. It is just a matter of adopting the 2018 standard.

“This government wouldn’t want to do that because if they do, inflation would go above 40 per cent,” he said.

The spokesperson of the NBS, Sunday Icheidi, was, at the time this report was being published, yet to respond to messages sent to him to react to these criticisms against the Bureau.


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