Former NBS Boss, Kale, Says Model For Measuring Nigeria’s Inflation Outdated
As arguments on the accuracy of Nigeria’s inflation report heighten, Yemi Kale, the former Statistician-General of Nigeria and the Chief Executive Officer of the National Bureau of Statistics has admitted that the index weights and basket used for measuring Nigeria’s inflation is outdated and needs review.
Kale left office in 2021 and was replaced by Simon Harry.
Kale who is now a partner and chief economist at KPMG Nigeria stated his position during an interview on Arise TV monitored by THE WHISTLER.
The former NBS boss said, “The inflation rate might not completely reflect current activity because the basket is outdated.”
The International Monetary Fund said in the ‘Nigeria: 2022 Article IV Consultation’ that the index weights and basket deployed is outdated.
IMF said, “The official monthly consumer price index (CPI), a composite of urban and rural price data, is available on a timely basis. However, the index weights and baskets are based on expenditures derived from the 2003/04 National Consumer Expenditure Survey.
“The weights are severely outdated and are not representative of current expenditure patterns. Outdated weights can introduce a bias into the index.
“The update of the CPI—using new weights from the 2018 National Household Livings Standards Survey—is still ongoing. The compilation of an updated producer price index is ongoing but funding for the survey is uncertain. AFW2 plans to provide additional technical assistance to support the CPI update and improvements to Nigeria’s price statistics.”
Bismarck Rewane, the Chief Executive Officer of Financial Derivatives Company is one of the economists that has been at the forefront of faulting the inflation figures emanating from the NBS.
Bismarck had argued that the NBS basket for measuring inflation was constituted back in 2009.
The consumer basket is supposed to be reconstituted every five years, Rewane argued.
Nigeria’s inflation was 21.91 per cent in February 2023 but Rewane measured inflation above 40 per cent if the basket is ‘reconstituted’.
Kale said, “Statistical methodolgy has to be reviewed every now and then. Mr Rewane is correct and wrong. He is correct in the sense that the CPI is based on household consumption of 2009 and it is outdated. But it is wrong when he said nothing has been done about it because I know full well that just before I left, we had constituted a process of re-weighting the CPI using the more updated consumption basket.
“And yes, they have some changes in the weight. For example, the weight of telecommunication is much higher; the weight for food eating is much higher; transportation is much higher. That affects the food basket which will affect the overall inflation. Yes, I won’t say that the current inflation rate is 100 per cent accurate because the basket has changed and I know that we have completed the process of re-weighting.
“We are almost in the process of starting the process. I expect that the NBS publish the new weight anytime soon. The statistical methodology will tell you that when you have such a big change you are going to test the new weight for a time to ensure there are no problems. Maybe that is the stage that the bureau is currently in.”