The recent release by the National Bureau of Statistics (NBS) on the decline of the October 2025 consumer price index (CPI) or inflation figures has brought some relief to many Nigerians, especially to the Bola Ahmed Tinubu administration. The NBS release, which indicates that headline inflation dropped from 18.02% in September to 16.02% in October, has been in the news lately. For the authorities, that is a remarkable achievement.
The Tinubu administration has evidently been eager to showcase its economic success since it came into office two years ago, particularly in the establishment of macroeconomic stability, which it has claimed to have achieved. It is important that the administration prove that its record of significant milestones in the management of the economy in the past two years is real and not a fluke. The government’s success in this regard will improve the positive perception of its performance level in the minds of the citizenry.
It can also be recalled that this is the sixth successive decline in the headline inflation, which, before the rebasing of the index, had been recorded at 33.88% a year ago. The Central Bank of Nigeria (CBN) had also been in concert with other arms of government in this battle to enhance price stability for the well-functioning of the Nigerian economy.
However, a number of scholars have wondered whether this reduction in the rate of inflation is real. Some even allege that the reduction could be a case of working towards the answer to the target of 15% set in the 2025 budget. The argument has been why the rate is continuously trending downwards, even when many Nigerians are still struggling to eke out a living, and the reported reductions in the prices of commodities are limited to a few commodities. These are presumed to be the ones selected to comprise the basket of commodities used in determining the changes in the consumer price index.
Based on the basket used, food inflation, according to the NBS, on a year-on-year basis, moderated to 13.12% in October 2025 from the 39.16% recorded in the same period of 2024. Conceptually, inflation is known to be the persistent increase in the general price level and thus can be manipulated if the commodities selected are the ones experiencing a decline in prices, while those with stable or increasing prices are left out of the basket used in determining the computation. Hence, there is a need for an evaluation of the methodology the NBS uses to compute the inflation rate.
From the report, the key areas identified as the source of the decline in the inflation rate have been the falling trend of prices of food items and the increasing stability of the exchange rate, where, on a year-on-year basis, a gain of over N250 has been recorded in the exchange rate of the naira to the United States dollar. Aside from the question of the selection criteria for the food items in the basket of computation, the exchange rate issue can also be interrogated in that frequent borrowing and interventions in the foreign exchange market by the CBN have been a sort of life support for the naira’s exchange rate relative to other foreign currencies.
Currently, the market has been experiencing liquidity challenges, and if the persistent CBN interventions are not sustained, there is the concern that the much-acclaimed gains may be transitory. The economy needs a sustainable recovery, not a fragile one.
Another factor that might have been assisting in the reduction of the inflation rate, which is largely overlooked, is the weak purchasing power of the average Nigerian. Nominal wages have been stagnant in many sectors of the economy and with the rampaging inflation of the past, real wages have been declining to the extent that the average person is poorer than he or she was in 2023 when this administration came into office. Not with the higher costs of petroleum motor spirit and other petroleum products and their effect on the costs of transportation and the final prices of basic commodities, especially for those whose demand are price inelastic.
The lower real wages have led to a drop in aggregate demand and thus a drop in prices. Many manufacturers currently keep large inventories of their finished products because average real incomes are very low. In the education sector, for example, the Academic Staff Union of Universities (ASUU) is currently having a running battle with the authorities on nominal wage increase, which also applies to other sectors except for the financial services sector and a few others, which have experienced relative wage increases to cushion the inflation trend of the past.
Certainly, it can be acknowledged that the fall in the inflation rate is a good development for the Nigerian economy. The government needs to enhance real wages in the economy, which will lead to an increase in aggregate demand in the economy. At that point, the decline in the rate of inflation will be put to the test, whether it is for real or a fluke.
What is clear also is that beyond brandishing statistics on inflation or strength of the local currency, the government still has a lot of work to raise the quality of the average Nigerian life, which presently is very low. For instance, the nominal gain in the country’s economy is constantly wiped out by rampant insecurity and other social instability across the country. The government must come to terms with the fact that there can be no real economic prosperity or foreign investors’ confidence in a polity mired by terrorism.
