On Monday, the National Bureau of Statistics (NBS) released its monthly inflation report for October. Since NBS released the report, Nigerians have queried if the data is a true reflection of market reality?
According to the report, the consumer price index (CPI), which measures the rate of change in prices of goods and services, declined for the seventh consecutive time to 15.99 percent in October.
The figure is 1.76 percent points higher than the 14.23 percent recorded in October 2020.
“From where does the National Bureau of Statistics get their data? Is it from the same market and society we patronize and live in?” Godson Udeagha, a Facebook user, quizzed the recent inflation report.
But how exactly is the inflation rate calculated? Is NBS report a true reflection of the current market reality?
NBS CPI METHODOLOGY
In discussing the 15.99 percent inflation rate for October, we should first look closely at the methodology used by the bureau to arrive at their conclusion.
According to NBS, the CPI measures the average change over time in the prices of goods and services consumed by people for day-to-day living. The bureau said it employs the services of 10,534 informants spread across the country to provide prices of goods and services monthly.
The market items used to arrive at their conclusion currently comprise 740 goods and services regularly priced.
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 per sector across the state.
The next step, according to the NBS, is to use the average price to calculate the basic index for each commodity, that’s the current year price of each commodity is compared with a base year’s price to obtain a relative price