The Financial Reporting Council (FRC) of Nigeria has officially stated that the country’s economy does not meet the criteria to be classified as hyperinflationary, citing a positive economic outlook and recent updates on key economic indicators.
In a statement issued on Wednesday, Rabiu Olowo, the FRC’s Chief Executive Officer (CEO), reaffirmed that Nigeria does not qualify as a hyperinflationary economy under the current standards, following its earlier announcement on January 23, 2025.
This conclusion is an addendum to the council’s previous position, which took into account recent economic developments, including the release of the World Economic Outlook (WEO) report by the International Monetary Fund (IMF) and the rebasing of the economy by the National Bureau of Statistics (NBS) in January.
“As stated in the earlier release on 22nd January, 2025, determining hyperinflation requires significant judgment and consideration of all relevant indicators,” Olowo said. “Based on the current economic outlook, we conclude that Nigeria is not yet a hyperinflationary economy, which strengthens our earlier position.”
The statement further clarified that International Accounting Standard 29 (IAS 29), which provides guidelines for financial reporting in hyperinflationary economies, should not be applied to the preparation of financial statements for the 2025 fiscal year.
IAS 29 helps entities account for the effects of hyperinflation on their financial statements when the functional currency is that of a hyperinflationary economy.
However, the FRC emphasized that Nigeria’s current economic performance does not meet the threshold for the application of these accounting standards.
Olowo explained that the FRC’s conclusion was based on a comprehensive evaluation of five key indicators of a hyperinflationary environment, as well as consultations with various stakeholders, including external auditors and regulatory bodies.
One of the primary factors in the council’s assessment was the general population’s preference for holding wealth in non-monetary assets or relatively stable foreign currencies, rather than in the local currency.
The FRC noted that local currency is typically invested quickly to preserve purchasing power, and that prices in the country are often quoted in foreign currencies to mitigate the effects of inflation.
READ ALSO: FG Unveils Agribusiness Policy to Boost Food, Economy
Additionally, Olowo highlighted that sales and purchases on credit are often priced to offset the expected loss of purchasing power during the credit period, even if the period is short.
Despite these considerations, Nigeria’s inflation rate over the past three years remains high but does not yet qualify as hyperinflationary.
Olowo also pointed to the recent stabilization of refined petroleum product prices, following the reversal of a policy that had seen crude oil sales to Dangote Refinery suspended in naira.
This policy change has helped stabilize fuel prices, contributing to the overall positive economic outlook.
The FRC CEO assured that the council would continue to monitor the country’s economic situation and update its stance as necessary.
Despite the current positive outlook, the council acknowledged that Nigeria’s cumulative inflation rate over three years is approaching or exceeding 100%, an indicator that will continue to be assessed.
“The return of crude oil sale in naira to Dangote Refinery has been a significant development in stabilizing the price of refined petroleum products across the country, and we will continue to monitor these changes,” Olowo concluded.
The FRC’s latest statement underscores the importance of ongoing assessment of economic conditions and the careful consideration of multiple factors before making determinations on Nigeria’s economic status.