Falling inflation does not necessarily mean falling prices. If the inflation rate remains positive, the measured price level is still higher than in the comparison period, even though the increase is smaller than before.
The distinction is between the price level and its rate of change. A lower rate can slow the rise in household costs without undoing earlier increases.
A Simple Example
Suppose an unchanged basket of goods costs 10,000 naira at the starting point. These figures are hypothetical and do not represent a Nigerian price survey.
- After the first year, the same basket costs 12,000 naira. That is a 20% increase.
- After the second year, it costs 13,200 naira. That is a 10% increase from the previous year.
The inflation rate in this example falls from 20% to 10%, but the basket becomes more expensive in both years. It ends 3,200 naira, or 32%, above its starting cost.
That slowing of price growth is called disinflation. A decline in the overall price level over the relevant period is deflation. A reduction in the price of one item does not, by itself, establish deflation across the whole basket.
Check Whether the Comparison Is Monthly or Annual
Year-on-year inflation compares an index with the same month a year earlier. Month-on-month inflation compares it with the immediately preceding month. The two rates answer different questions.
Consider a second hypothetical example. An index stands at 110 in February of one year, 120 in January of the following year and 121 in February of that following year.
- The February year-on-year increase is 10%: 121 is 11 points above 110.
- The February month-on-month increase is approximately 0.83%: 121 is one point above 120.
Both calculations use the same latest index but different starting values. An annual rate can fall while prices continue to rise from one month to the next.
The earlier comparison also matters. A large price rise a year ago can affect the latest annual rate as it enters or leaves the comparison period. This is a base effect, not proof that today’s shop prices have fallen.
Read the Index Label
For the wider distinction between prices, output and currency values, see our guide to Nigeria’s main economic indicators.
Nigeria’s National Bureau of Statistics (NBS) publishes the Consumer Price Index (CPI). Its headline, food and other indices cover different selections of goods and services.
Check which measure is being quoted before comparing two headlines. A food-inflation figure is not interchangeable with headline inflation, and an index value is not itself the inflation percentage.
Okay News reports that the NBS’s CPI documentation identifies 2023 as the weight reference period and 2024 as the price reference period for its rebased series. The documentation also explains that the basket and item weights were updated.
Weights determine how much different spending categories contribute to the overall measure. Rebasing changes the statistical reference framework; it does not change the amount written on a shop receipt.
Use the NBS’s comparable series and notes when a method changes. Do not place a new-series number beside an old-series number and assume that the entire difference represents a change in actual prices.
Why a Household’s Experience Can Differ
A national index reflects a weighted basket, not the exact purchases of every household. A family spending a larger share on a rapidly rising item can face a different change in costs from a household buying less of it.
Quantities and product specifications matter too. Comparing a smaller packet with a larger one can hide a change in the price per unit. When checking personal expenses, compare the same quantity and quality where possible, and record substitutions separately.
The NBS has also warned in its food-price reporting that changed item specifications following rebasing can make some older and newer observations unsuitable for direct comparison. That is a reason to read the notes attached to a series.
A Percentage Point Is Not the Same as a Per Cent
In the first example, a fall from 20% to 10% is a decline of 10 percentage points. Relative to the starting rate, it is a 50% reduction. Neither description means the basket’s price fell by 10% or 50%.
Before treating a headline as evidence that costs have eased, ask: which prices, over what period, under which measure? Then check whether the report describes slower increases, an actual decline in the index or a change in its calculation.
