Nigeria Not Yet Hyperinflation Economy – FRC insists

The Financial Reporting Council of Nigeria (FRC) on Wednesday pointed out that Nigeria was not yet a hyperinflationary economy. Owing to this, the Council, in a press statement signed by its Executive Secretary/Chief Executive Officer, Dr. Rabiu Olowo, noted that the International Accounting Standard (IAS) 29 which borders on Financial Reporting in Hyperinflationary Economies should […]

The Financial Reporting Council of Nigeria (FRC) on Wednesday pointed out that Nigeria was not yet a hyperinflationary economy.

Owing to this, the Council, in a press statement signed by its Executive Secretary/Chief Executive Officer, Dr. Rabiu Olowo, noted that the International Accounting Standard (IAS) 29 which borders on Financial Reporting in Hyperinflationary Economies should not be applied in the preparation of financial statements for the 2024 financial year.

According to Olowo, “Determining hyperinflation requires significant judgment and consideration of all relevant indicators. After thorough analysis of the above indicators, the FRC concludes that Nigeria is not yet a hyperinflationary economy. Therefore, IAS 29 should not be applied in the preparation of financial statements for the 2024 financial year. The FRC will continue to monitor economic developments and update this position when necessary.

“The FRC is a federal government regulatory agency established by the Financial Reporting Council of Nigeria Act 2011 (as amended) that is charged with, amongst other things, issuing and enforcing financial reporting (accounting, auditing, valuation, actuarial) and corporate governance standards and guidelines across the public and private sectors in Nigeria. “

The statement noted that the FRC has extensively engaged various stakeholders such as the Professional Accounting Bodies in Nigeria, external auditors, government regulatory agencies, and significant public interest entities, where an objective evaluation of the five indicators of the economic environment of a country as stipulated in IAS 29: Financial Reporting in Hyperinflationary Economies were undertaken especially to determine the relevance and applicability of the standard in Nigeria in light of the inflationary trend in the country.

IAS 29 outlines the accounting requirements for entities in hyperinflationary economies. It does not specify when hyperinflation arises or is deemed to arise but rather outlines several indicators of hyperinflation that includes a preference for non-monetary assets, pricing in stable foreign currencies, credit sales adjusting for inflation, and a cumulative inflation rate approaching or exceeding 100% over a three year period.

The FRC’s analysis of these indicators for Nigeria was that, “Data shows that Nigerians continue to transact in local currency and invest in Naira-denominated assets, indicating confidence in the local currency. There is no indication that the general population prefers to keep its wealth in non-monetary assets or in any other relatively stable foreign currency.

“Data from the Central Bank of Nigeria (CBN) and the financial statements of Nigerian financial institutions continue to show that investment in monetary assets such as treasury bills, mutual funds, fixed and current deposits and other short-term monetary assets have been increasing over the last 3 years. “

According to the statement, the Central Bank of Nigeria had increased the monetary policy rate over time in a bid to curtail inflation.