According to the International Monetary Fund (IMF), the weights employed by the National Bureau of Statistics (NBS) to construct the monthly consumer price index (CPI) are “very out of date.”
The CPI is used to measure inflation by tracking the price fluctuations of a basket of consumer goods and services across time.
The makeup and weights of the basket are often determined by surveys of household or family spending habits.
In January, the inflation rate in Nigeria increased to 21.82 percent, up from 21.34 percent in December.
In its newly published 2022 Article IV consultation report on Nigeria, the IMF stated that the NBS inflation index does not accurately reflect actual spending patterns.
It cautioned that out-of-date weights may cause bias in the inflation index.
The official monthly consumer price index (CPI), a mix of urban and rural price data, is timely available. “However, the index weights and basket are generated from the 2003/04 National Consumer Expenditure Survey,” stated the IMF.
“The weights are extremely out of date and do not accurately reflect current spending trends. Outdated weights can contribute bias to an index.”
The international monetary organization requested the NBS to utilize new weights from the 2018 National Household Living Standards Survey instead of the 2003/04 National Consumer Expenditure Survey.
The collecting of an updated producer pricing index is ongoing, but its funding is uncertain, according to the report.
The IMF guaranteed it would assist Nigeria in revising its CPI.
The organization stated, “The update of the CPI using new weights from the 2018 National Household Living Standards Survey is ongoing.”
“An updated producer pricing index is now being compiled, however funding for the survey is questionable.
“Africa Regional Technical Assistance Center West 2 (AFW2) proposes to provide additional\stechnical assistance to support the CPI update and improvements to Nigeria’s price statistics.”