•Insists economy not hyperinflationary
The Financial Reporting Council of Nigeria (FRC), yesterday, said the International Accounting Standard (IAS) 29, which borders on reporting in hyperinflationary economies, does not apply to Nigeria and should not be used in preparing the 2024 financial statements.
The council, in a press statement signed by its Executive Secretary/Chief Executive Officer, Dr Rabiu Olowo, argued that Nigeria is not in a hyperinflationary economy.
“Determining hyperinflation requires significant judgment and consideration of all relevant indicators. After a 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,” Olowo said.
The FRC is a federal government regulatory agency established by the Financial Reporting Council of Nigeria Act 2011 and charged with, amongst other things, the responsibility of enforcing financial reporting (accounting, auditing, valuation, actuarial) and corporate governance standards.
The chief executive said 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, to evaluate the five indicators of the economic environment of the country as stipulated in IAS 29.
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 include 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 three years.
Olowo said the analysis of the indicators for Nigeria showed that “The general population prefers to keep its wealth in non-monetary assets or a relatively stable foreign currency. Amounts of local currency are immediately invested to maintain purchasing power. 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 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 three years.
“Data from the National Pension Commission shows that the Nigerian pension assets which are predominantly held in monetary assets have also continued to increase. The pension assets totalled N22.25 trillion as of November 2024 compared to N18.35 trillion as of December 2023. The currency in which most of these non-monetary assets are denominated is the Naira. There is no rejection of the local currency as a medium of exchange in Nigeria as the Naira still serves as its base currency for all transactions.
“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. This is evident from a review of the major e-commerce platforms and shopping malls in Nigeria such as Jumia, Slot, Konga, Jiji etc. The prices of general goods and services are determined and charged in Naira. Monetary amounts are predominantly regarded in terms of the Nigerian Naira by the general population and not in terms of any other foreign currency suggesting that this indicator is not met.”
