The Financial Reporting Council of Nigeria (FRC) has said that Nigeria is not currently a hyperinflationary economy, ruling out the application of International Accounting Standard (IAS) 29 for the preparation of financial statements for the 2024 financial year.
In a statement released on Wednesday and signed by the Executive Secretary/Chief Executive Officer, Dr. Rabiu Olowo, the FRC emphasized that after thorough analysis of economic indicators, the nation’s inflation trends do not meet the criteria for hyperinflation.
The Council noted that IAS 29, which provides guidance on financial reporting in hyperinflationary economies, should not be applied in Nigeria, adding that it will continue to monitor the situation and provide updates as necessary.
Olowo highlighted the FRC’s mandate as a federal regulatory body responsible for issuing and enforcing financial reporting and corporate governance standards across Nigeria’s public and private sectors. He explained that the Council engaged extensively with stakeholders, including professional accounting bodies, external auditors, and regulatory agencies, to evaluate the applicability of IAS 29 in the Nigerian context.
IAS 29 outlines several indicators of hyperinflation, such as a preference for non-monetary assets, pricing in stable foreign currencies, and a cumulative inflation rate nearing or exceeding 100 per cent over three years. The FRC’s assessment found no evidence supporting these indicators in Nigeria.
Data from the Central Bank of Nigeria and financial institutions revealed sustained confidence in the Naira, with increasing investments in Naira-denominated assets. Pension assets managed by the National Pension Commission also showed growth, rising to N22.25trn in November 2024 from N18.35trn in December 2023. These findings contradicted the notion of a preference for stable foreign currencies or non-monetary assets.
The Council further observed that salaries, wages, and prices of goods and services are predominantly denominated in Naira, indicating no significant shift toward pricing in foreign currencies. Additionally, credit transactions in the country are not adjusted for inflation, reflecting an absence of hyperinflation-driven pricing.
Olowo noted that while Nigeria faces high inflation, the nation’s economic indicators do not meet the threshold for hyperinflation. Historical trends in minimum wage revisions and price adjustments suggest that wages and prices are not consistently linked to a price index. The Council also pointed out that interest rates, currently at 27.5 per cent, are adjusted primarily to control inflation, rather than reflecting hyperinflationary pressures.
The International Monetary Fund’s October 2024 report projected Nigeria’s inflation rate to stabilize at 21 per cent by the end of 2025. This aligns with recent Central Bank of Nigeria efforts, including monetary tightening measures, to curb inflation and stabilize the economy.
The FRC acknowledged the short-term economic challenges caused by structural reforms such as the removal of fuel subsidies and the floating of the Naira. However, these reforms are expected to contribute to long-term economic stability.
Factors such as the operationalization of local refineries, increased crude oil production, and agricultural initiatives are anticipated to drive a positive economic outlook and a reduction in inflationary pressures.
Olowo reassured stakeholders of the Council’s commitment to monitoring economic developments and providing timely guidance to support sound financial reporting and governance practices.
