Nigeria not yet hyperinflationary economy – FRC
The Financial Reporting Council of Nigeria (FRCN) has stated that the country’s inflation rate has not reached the level of hyperinflation and so it would be wrong to apply the International Accounting Standard (IAS) 29 for the preparation of financial statements for the 2025 financial year. The FRC made the declaration despite recent data from […]
The Financial Reporting Council of Nigeria (FRCN) has stated that the country’s inflation rate has not reached the level of hyperinflation and so it would be wrong to apply the International Accounting Standard (IAS) 29 for the preparation of financial statements for the 2025 financial year.
The FRC made the declaration despite recent data from the International Monetary Fund (IMF) and the National Bureau of Statistics (NBS) suggesting high inflationary pressures.
The FRCN, a federal government agency charged with, amongst others, issuing and enforcing financial reporting (accounting, auditing, valuation, actuarial) and corporate governance standards and guidelines across the public and private sectors in the country, said its analysis indicated that inflation pressure is easing with the recent rebasing.
Therefore, the council, through its Executive Secretary/CEO, Dr Rabiu Olowo, said it would be wrong to apply the IAS 29 in reporting financial statements.
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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 3-year period.
The council stated that based on its analysis, there is a slight reduction in the 3-year cumulative inflation rate from 110.9% to 107.02%, given the rebasing by the National Bureau of Statistics (NBS) and reflected in the IMF World Economic Outlook Data that takes into account the rebased CPI.
“Even though it exceeded the threshold specified in IAS 29, the marginal reduction of 3.88% in the cumulative rate revealed easing of the inflation pressure in the economy,” the council stated.
The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency are immediately invested to maintain purchasing power, it said.
In addition to the explanations provided to support that Nigerians continue to transact in local currency, as stated in the January 2025 Press Release, Investment in Local Currency continues to grow, it noted.
For instance, in February 2025, 670 billion treasury bills issued were oversubscribed to 3.1 trillion; in April 2025, the FGN Saving Bond issued by the DMO in two types: 2-Year and 3-Year tenors had 1.135 trillion and 3.2 trillion subscriptions, respectively.
“This shows that Nigerians continue to transact in local currency and invest in naira-denominated assets, indicating confidence in the local currency.
“The general population regards monetary amounts not in terms of the local currency but in terms of relatively stable foreign currency. Prices may be quoted in that currency:
“Monetary amounts in Nigeria are in naira being the local currency. Salaries and wages for labour are paid in naira. Goods and services are quoted in naira as well. Nothing has changed compared to the previous position of the council, as monetary amounts are predominantly regarded in terms of the Nigerian naira by the general population and not in terms of any other foreign currency.
“Purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.
“There is no evidence to support the premise that the price of credit transactions is adjusted for inflation, as sales and purchases on credit do not take place at prices that compensate for the expected loss of purchasing power during the credit period.”
The council emphasised that determining hyperinflation “requires significant judgment and consideration of all relevant indicators.”
“The FRC concludes that Nigeria is not yet a hyperinflationary economy due to the positive economic outlook that has strengthened the council’s earlier position.
“Therefore, IAS 29 should not be applied in the preparation of financial statements for the 2025 financial year. The FRC will continue to monitor economic developments and update this position when necessary.”