The Difference Between Nigeria’s Inflation Rate and What You Experience

Every time Nigeria’s Bureau of Statistics (NBS) releases its monthly inflation data, many people scratch their heads in confusion. They often wonder, “How can the official inflation number be so different from what I see in my daily life?” 

For instance, the most recent inflation figures from August 2024. According to the NBS, the Consumer Price Index (CPI) stood at 784.4, which shows a significant increase from 593.6 in August 2023. 

This means that prices have gone up by about 32.15%. If you bought a generator for 1,000,000 Naira last year, the NBS says you would need around 1,321,500 Naira to buy the same generator this year. 

But many people are left thinking, “Is it really that simple? How does this relate to what I experience in my life?”

Average of Averages

One reason for the confusion is that the inflation number released by the NBS is just an “average of averages.” This means that it summarizes prices across many different categories and items to give a broad picture of price changes in the country. 

While it helps show whether prices are generally rising or falling, it doesn’t reflect the individual experiences of all Nigerians.

When looking at these inflation numbers, it’s crucial to ask yourself what they mean for you personally. The truth is, everyone’s experience with inflation is different.

Your Unique Inflation Rate

The impact of inflation on you personally depends on your lifestyle and spending habits. 

For example, if you’re someone who enjoys shopping for groceries at upscale supermarkets in Lekki, your inflation experience is likely very different from someone in a less affluent area, like Ajangbadi, who primarily eats traditional meals like pap and akara (bean cakes).

Similarly, if you run a restaurant, your inflation rate will differ from someone running a school. Each business has its own unique costs. For a restaurant, essential expenses include food, beverages, labor, and possibly fuel. In contrast, a school might focus on labor costs, learning materials, and accommodations. Because of these different focuses, the way inflation affects each of them can be quite distinct.

Breaking Down the Data

To understand how inflation affects you, it helps to look at the underlying data that the NBS provides. This data is broken down in various ways:

1. Categories of Goods and Services: The NBS tracks around 12 to 13 categories, giving each a different weight. For instance, food has a significant impact, making up about 50% of the inflation calculation, while housing and clothing have weights of 16.7% and 7.7%, respectively. If most of your income goes toward food, your personal inflation rate will align more closely with food inflation rather than the overall inflation rate.
2. Urban vs. Rural Areas: Inflation affects city dwellers and those in rural areas differently. Data shows that prices tend to rise faster in cities due to higher demand and transportation costs. For example, the inflation rate for imported food in urban areas is around 42.97%. This means that if you live in a city and rely heavily on imported food, you may feel the pinch of rising costs much more than someone in a rural area.
3. Regional Differences: Inflation can also vary from one state to another. For example, some states have inflation rates much higher than the national average. As of August 2024, Sokoto had a food inflation rate of about 47%, while Bauchi recorded an overall inflation rate of 46%. Understanding your state’s inflation rate can help you gauge the cost of living in your area better.

Why Knowing Your Inflation Rate Matters

So why should you care about your unique inflation rate? For individuals, understanding inflation helps you plan your finances better. If you know prices are rising quickly, you may need to seek higher-paying job opportunities or even consider moving to a more affordable area.

For small business owners, keeping track of inflation is crucial for protecting profits. If you don’t adjust your prices according to rising costs, your profits can quickly diminish. Additionally, paying attention to inflation helps you stay competitive. 

You need to ensure that employee salaries are in line with the current market to avoid losing valuable staff to better-paying jobs.