Overview: What the Base Effect Means for December 2025 Inflation
Nigeria’s December 2025 inflation figures are expected to show an artificial spike, driven not by shifting price dynamics in the economy but by a technical base effect. The National Bureau of Statistics (NBS) has openly framed the development as a one-off statistical phenomenon tied to how comparisons are calculated in the year-on-year (YoY) CPI readings. For policymakers, investors, and households, the distinction between a genuine inflation upturn and a base-driven blip is critical for interpreting the data and responding appropriately.
Understanding the Base Effect
The base effect occurs when the starting point for a year — the previous December’s price level — is unusually low or high. When the same month in the subsequent year is compared, even modest price movements can translate into a sharp YoY percentage change. In Nigeria’s case, a lower December 2024 reading could magnify the YoY figure in December 2025, producing what statisticians describe as an “artificial spike.” The NBS emphasizes that this is a numerical artefact rather than an indicative surge in underlying inflation pressures.
What the NBS is Clarifying
Officials have stressed that the likely spike does not imply a structural acceleration in inflation drivers such as food prices, energy costs, or exchange rate pressures. Rather, it reflects mathematical mechanics: once the base year shifts, the same or even softer price movements can appear more pronounced. This distinction matters because monetary policy, consumer expectations, and fiscal planning hinge on whether the signal is real or statistical.
Implications for Policy and Markets
For the Central Bank of Nigeria (CBN) and its peers, a base-driven spike should be treated with caution when setting policy or issuing forward guidance. If policymakers respond to a temporary, numerically inflated figure, they risk misallocating scarce policy ammunition or dampening legitimate demand in a fragile economy. Analysts expect the central bank to acknowledge the base effect in its communications and focus on trend inflation measures, core inflation, and persistent price movements over several months rather than a single month’s YoY change.
What To Watch Beyond December
Market watchers will assess several corroborating indicators to determine whether inflationary pressure is broadening. Key signals include movements in core inflation (stripping out volatile food and energy prices), services inflation, and the trajectory of prices in essential categories such as healthcare, housing, and transportation. Additionally, exchange rate stability, import costs, and agricultural supply dynamics will influence whether the December spike translates into a longer tail for inflation expectations.
Household and Business Impacts
For households, a transient spike can affect price perception and budgeting, especially if lenders and retailers react to the headline figure. Businesses may revisit pricing strategies, wage negotiations, and cost management during the next quarter. Transparent communication from statistical authorities and the central bank can help anchor expectations and prevent overreactions that could amplify volatility in consumption and investment.
Bottom Line
The anticipated artificial inflation spike ahead of the December 2025 release is a reminder that statistics can be as much about computation as about commerce. While the headline YoY inflation rate may show a jump, the broader inflation landscape will be better understood by examining core metrics, multi-month trends, and the central bank’s policy posture. Stakeholders should treat the December reading as a data point within a wider context, rather than a definitive verdict on Nigeria’s price stability trajectory.
