Inflation Slowed Down In August, Now 17.6%

Inflation

Latest data from the National Bureau of Statistics, NBS shows that Nigeria’s inflation rate is slowing down. According to the latest data, inflation increased by 1.0% in August compared to July increment of 1.3%.

The NBS now puts August inflation at 17.6%. This is still a source of concern, considering the fact that the same NBS announced that the country is officially in recession.

Also, the NBS noted that “Increases were recorded in all Classification of Individual Consumption by Purpose, COICOP which contribute to the Headline index reflecting higher prices across the board”.

The bureau added that “The major divisions responsible for accelerating the pace of the increase in the headline index were Housing, Water, Electricity, Gas and Other Fuel, Education and Transportation Services”.

However, the data still points to a “third consecutive month of a slower pace of increase in the Headline Index”. Next week the monetary policy committee, MPC will deciding whether to raise or hold interest rate. The result of this survey is pointing to a hold in rate.

How Is the CPI Calculated?

As to how the NBS come up with the data, the first stage in the calculation of the CPI is the collection of prices on each item (740 goods and services) from outlets in each sector (rural or urban) for each state.

Prices are then averaged for each item according to sector across the state. The next step is to use the average price to calculate the basic index for each commodity: The current year price of each commodity is compared with a base year’s price to obtain a relative price.

The NBS then use the Laspeyres formula to compute an aggregated index for each class (which has a multitude of commodities which have similar consumption purposes): Here the sum of the product of weights (obtained from the expenditure survey) and relative prices for each item is divided by the sum of the weight of the items in that class, and the result multiplied by 100 gives the required index number.

This index number is still classified according to the urban or rural classification sector for each of the 36 states and the FCT. This yields 85 classes then 48 groups which are then reclassified into 12 Divisions to derive:

1. The country composite index

2. The Urban National index

3. The Rural National index

4. The Combined Urban and Rural State Composite index The survey methodology generates 3774 all items indices for all states and the FCT.

The survey methodology generates 3774 all items indices for all states and the FCT.

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