Nigeria Not in Hyperinflation, Financial Reporting Council Declares
The Financial Reporting Council of Nigeria (FRC) has determined that Nigeria has not yet entered a hyperinflationary economy, advising corporates to refrain from adopting International Accounting Standard (IAS) 29 in preparing their financial statements for the 2024 financial year.
In a statement issued on Wednesday, the Executive Secretary and Chief Executive Officer of the FRC, Dr. Rabiu Olowo, explained that an extensive evaluation of Nigeria’s economic environment revealed insufficient grounds for applying the accounting standard designed for hyperinflationary economies.
IAS 29, established in 1989, requires companies in hyperinflationary economies to restate their financial statements to reflect changes in the purchasing power of their functional currency. While the standard does not explicitly define when hyperinflation arises, it sets out five economic indicators for assessment.
Economic Confidence in the Naira
Dr. Olowo highlighted key findings from the Council’s engagement with stakeholders, including professional accounting bodies, external auditors, and government regulators.
“Data shows that Nigerians continue to transact in local currency and invest in naira-denominated assets, indicating confidence in the naira,” Olowo stated. He pointed to increasing investments in monetary assets such as treasury bills, mutual funds, and fixed deposits over the past three years.
Additionally, pension assets—predominantly held in naira—have shown steady growth, reaching ₦22.25 trillion as of November 2024, up from ₦18.35 trillion at the end of 2023. “There is no rejection of the naira as a medium of exchange, and the prices of goods and services are predominantly determined in naira,” he added.
The FRC also noted the absence of practices typically associated with hyperinflation, such as quoting prices in foreign currencies or adjusting credit transactions for inflation.
One Criterion Met, Four Unfulfilled
Out of the five criteria outlined in IAS 29 for determining hyperinflation, Nigeria met only one: the cumulative inflation rate over three years exceeding 100%. According to data from the National Bureau of Statistics, Nigeria’s three-year cumulative inflation rate stood at 110.9% as of December 31, 2024.
The other four indicators—including a preference for holding wealth in non-monetary assets or foreign currency and the prevalence of inflation-adjusted credit transactions—remain unfulfilled.
Ongoing Monitoring
Dr. Olowo reiterated that determining hyperinflation requires careful judgment and consideration of all relevant indicators. “After a thorough analysis, 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,” he said.
However, the FRC pledged to continue monitoring Nigeria’s economic landscape and will revise its position should conditions change.
The announcement provides clarity for corporations navigating Nigeria’s challenging economic conditions, ensuring financial reporting remains aligned with prevailing realities. While inflationary pressures persist, the FRC’s stance underscores a cautious and data-driven approach to hyperinflation classification.
