January 9, 2025/Cordros Report

The Nigerian Economic Summit Group (NESG), in collaboration with the Nigerian Bureau of Statistics (NBS), held a sensitisation workshop on GDP and CPI Rebasing earlier today (9 January). The NBS proposed;

GDP

• Changing the base year for Real GDP computation to 2019 from 2010
• Coverage of more areas such as Digital Economy, Pension Fund Administrators, National Health Insurance Scheme, Nigerian Social Insurance Trust Fund, Modular Refineries, Domestic Households as Employers of Labour and Illegal & Hidden Activities
• Digitizing data collection methods

Inflation

• Change in the price reference period to 2024 (Currently: 2009)
• Adjustment in the weighting of items in the CPI Basket using 2023 reference period 
• Increase in the number of items in the CPI basket to 960 (currently 740)
• The inclusion of other key indexes such as services, energy, farm produce and goods
• Conduct of National Census of retail outlets, with the inclusion of online retail outlets
• Using a short-term relative index instead of a long-term relative index

The NBS expects to launch the results of the rebasing at the end of January 2025 after validation.

Our View

We expect the GDP rebasing exercise to result in a higher nominal GDP as newer economic activities, industries, and services are incorporated. Consequently, we expect a significant decline in the key economic ratios, including debt-to-GDP ratio, tax-to-GDP ratio, fiscal deficit-to-GDP ratio, etc.

The adjustment of the price reference period for inflation to 2024 provides a more accurate reflection of current spending patterns shaped by structural economic changes and market reforms. However, we believe the revised CPI weights for inflation estimation could present a downside risk to our 2025 base-case inflation projection (2025 average: 32.4% y/y). This risk primarily arises from the reduction in the weight of food and non-alcoholic beverages – where prices have risen at a faster pace (November 2024 inflation: 39.83% y/y) – to 40.1% from the previous 51.8%, despite the proposed increase in the weight of core items (November 2024 inflation: 27.87% y/y). These adjustments, including potential declines in key economic ratios and headline inflation, are expected to have a significant impact on fiscal and monetary policy direction in 2025.

Old vs New CPI Weights