Nigeria does not meet current criteria to be classified as a hyperinflationary economy, according to the Financial Reporting Council (FRC).
The FRC’s CEO, Rabiu Olowo, announced in a statement on Wednesday that local businesses will not use the international accounting standard (IAS) 29 in their financial reports for 2024.
A collection of guidelines for financial reporting is known as the IAS.
The FRC determined that the standard did not apply after evaluating Nigeria’s economy using the five indicators in “IAS 29: Financial Reporting in Hyperinflationary Economies,” according to Olowo.
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He clarified that IAS 29 defines accounting standards for hyperinflationary economies, citing signs like pricing in stable currencies, reliance on non-monetary assets, and a three-year cumulative inflation rate that is close to or more than 100 percent.
The CEO stated that Nigeria does not meet the majority of the requirements after summarizing the five IAS 29 indications.
“Most people would rather hold their wealth in non-monetary assets or in a foreign currency that is relatively stable,” he stated.
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Holdings of local currency are promptly invested to preserve purchasing power.
Money amounts are viewed by the general public in terms of a relatively stable foreign currency rather than the local currency. It is possible to quote prices in that currency.
Prices for sales and purchases made on credit offset the anticipated decline in purchasing power over the credit period, even if it is brief.
Prices, salaries, and interest rates are all correlated with a price index.
Nigeria satisfies the indication for a three-year cumulative inflation rate that approaches or surpasses 100%, according to Olowo.
He claimed that the operationalization of the Port Harcourt, Warri, and Dangote refineries will enhance Nigeria’s economic prospects and lower inflation.
The FRC stated that structural improvements, import regulations, agricultural initiatives, and greater crude oil output would all contribute to the upward trend.
The FRC will keep an eye on economic developments and, if needed, revise its position for the fiscal year 2025, Olowo continued.
