Methodological notes on the computation of consumer price index, inflation rate and GDP deflator in Nigeria.

Abstract

The officially published inflation rates for Nigeria have tended to generate a lot of arguments within the academia, the private and the public circles largely because of the feeling that the adopted methodologies for its computation tended to underestimate and or failed to indicate the true changes in real consumer price level. This paper attempts to review and compare the methodology for computing the major price indexes currently in use in Nigeria; Consumer Price Index (CPI) and Gross Domestic Product (GDP) deflator or Implicit Price Index (IPI) and the emergent inflation rates therefrom. It also discusses the problems and shortcomings of the methods, and proffers suggestions for evaluating both the statistical accuracies and interpretations of the outcome (inflation rate estimates) which·emerge from them. The paper is organised into three parts for ease of exposition. Part one explains the methodology for computing the CPI (old and new), the inflation rate and GDP deflator by the Federal Office of Statistics (FOS), while part two analyses methodological and other problems of the indexes. Part three is the summary and conclusion of the paper.