The Executive Secretary/ CEO of Financial Reporting Council of Nigeria (FRC), Dr. Rabiu Olowo, has announced that companies in Nigeria should not apply IAS 29 in preparing their Year 2025 financial statements.
Olowo explained that the rise in general prices of goods and services has not gotten to hyper inflationary level to warrant the application of IAS 29 in preparing financial statements.
He announced this in a press statement 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 required significant judgment and consideration of all relevant economic indicators.
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.”
According to him, this public statement is an addendum to the council’s earlier position on the above subject, which was released on the January 22, 2025.
It is also a 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 impacted the GDP and inflation rate.
He also added that this press statement flowed from the FRC’s engagement with various stakeholders such as the external auditors, government regulatory agencies etc., 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 the IAS 29 outlined the accounting requirements for entities in hyperinflationary economies, but did “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.”
The FRC’s analysis of these indicators for Nigeria, he said, 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 pointed out that the monetary amounts in Nigeria are still in Naira 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 the reality is that business entities in Nigeria have continued “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 3-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.
