The Financial Reporting Council of Nigeria (FRC) has declared that the inflationary rate in Nigeria has not reached a hyperinflation stage that would necessitate the application of IAS 29 for the preparation of financial statements for the 2025 financial year.
The FRC made this declaration in a public statement that was signed by its Executive Secretary/Chief Executive Officer, Dr. Rabiu Olowo, dated April 30, 2025, and captioned ‘FRC’s Position on IAS 29-Financial Reporting in Hyperinflationary Economies’.
Olowo clarified that determining whether the economy is in a hyperinflation would require significant judgement and consideration of all relevant economic indicators as the FRC has stated in its earlier release on January 22, 2025.
He said, “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.”
He explained that this public statement is an addendum to the council’s earlier position on the above subject released on the January 22, 2025 and sequel to the release of the World Economic Outlook Report by the IMF on April 22, 2025 and the rebasing of the Nigerian economy in January 2025 by National Bureau of Statistics (NBS) that has impacted the GDP and inflation rate, as well as the FRC’s engagement with various stakeholders such as the external auditors, government regulatory agencies and others, 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.
Olowo highlighted that inasmuch as the IAS 29 outlined 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 per cent over a three year period.”
According to him, the FRC’s analysis of these indicators for Nigeria revealed that Nigerians have continued to “transact in local currency and invest in Naira-denominated assets, indicating confidence in the local currency.”
For an instance, “in February 2025, N670 billion treasury bills issued were oversubscribed to N3.1 trillion
“In April 2025, the FGN Saving Bond issued by the DMO in two types: 2-Year and 3-Year tenors had N1.135 trillion and N3.2 trillion subscriptions, respectively.”
The FRC’s analysis further showed that even though prices might be quoted in stable foreign currency, the monetary amounts in Nigeria are still in Naira being the local currency as “salaries and wages for labour are paid in Naira and 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.”
The FRC also stated that “there is no evidence to support the premise that the price of credit transactions (in Nigeria) 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.”
It said that the reality is that “business entities in Nigeria continue to offer credit terms to their customers based on the terms of the contract, the risk appetite of the business and the risk profile of the customer” and nothing has indicated “that sales and purchases on credit take place at prices that are driven by inflation to compensate for the expected loss of purchasing power during the credit period.”
In addition, “interest rates, wages, and prices are not linked to a price index. The prices of goods and services are determined based on production cost, rather than being linked to a specific price index or reference point.
“Wages paid by the government are based on an agreed minimum wage negotiated and it is not subject to frequent changes.
“Wages in the private sector are based on industry benchmarks, which are also relatively stable and not linked to a price index.
“Interest rates applicable to market players in Nigeria are mainly benchmarked to the Central Bank of Nigeria’s Monetary Policy Rate (MPR).
“There is relative stability of the Interest Rate, which suggests that the CBN is prioritising price stability and inflation management, rather than indexing interest rates, prices and wages to a specific external price benchmark or index,” FRC said.
It also pointed out that there has been a slight reduction in the three-year cumulative inflation rate from 110.9 per cent to 107.02 per cent, 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 per cent in the cumulative rate revealed easing of the inflation pressure in the economy,” the FRC said.