The Financial Reporting Council of Nigeria (FRC) has concluded that the country does not meet the criteria to be classified as a hyperinflationary economy, following a comprehensive review of economic indicators outlined in the International Accounting Standard (IAS) 29.
The announcement was made in a statement issued on Wednesday by the Council’s Executive Secretary/CEO, Rabiu Olowo.
IAS 29, titled Financial Reporting in Hyperinflationary Economies, provides accounting guidelines for countries experiencing hyperinflation.
The standard evaluates five key indicators, including public preference for non-monetary assets, widespread pricing in foreign currencies, inflation-adjusted credit sales, interest rates and wages linked to price indices, and a three-year cumulative inflation rate exceeding 100 per cent.
Data from the National Bureau of Statistics (NBS) shows that Nigeria’s annual inflation rate rose to 34.8 per cent in December 2024, up from 34.6 per cent in November. This marks a continuation of the upward trend that began in September 2024, following a brief two-month decline.
The council said while Nigeria’s three-year cumulative inflation rate stood at 110.9 per cent as of December 2024, surpassing the IAS 29 threshold, the FRC determined that other critical indicators do not suggest hyperinflationary conditions.
It said the monetary amounts in Nigeria remain denominated in the Naira, which is also the preferred medium of exchange for transactions, citing data from the Central Bank of Nigeria (CBN), pension funds, and e-commerce platforms.
The council also observed that credit sales in the country are not typically adjusted to account for inflation, and wages remain unchanged for years, reflecting a lack of linkage between earnings, pricing, and inflation.
While recognising inflationary pressures driven by both domestic and global factors, the FRC emphasised that these do not amount to hyperinflation.
“While recent structural economic reforms implemented have led to short-term economic shocks, Nigeria cannot be deemed a hyperinflationary economy. These reforms, including floating the Naira and ending fuel subsidies, contributed to rising year-on-year inflation which reached 34.8 per cent in December 2024.
“However, there are signs that these inflationary effects are beginning to stabilize. Forecasts suggest a gradual disinflationary trend in 2025, supported by moderating food price growth relative to other sectors, according to the Economic Intelligence Unit (EIU).
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“The EIU projects an average inflation of 26.5 per cent for 2025, with potential for further reduction due to the upcoming rebasing of GDP and CPI data by the National Bureau of Statistics (NBS) in January 2025,” it said.
The council also acknowledged projections from the International Monetary Fund (IMF), which forecast Nigeria’s inflation rate to stabilise at 21 per cent by the end of 2025. “This projection indicates that Nigeria’s economy is on track to recover from the current inflationary pressures,” the FRC concluded.
The FRC based its decision on an assessment of several factors, including the population’s preference for local currency and the use of local currency for pricing. While inflation has been high, other indicators, such as the linkage between prices and a price index, did not meet the threshold for hyperinflation.
“Determining hyperinflation requires significant judgment and consideration of all relevant indicators. After 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 year ended December 31, 2024,” it said.
The FRC said it will continue to monitor economic developments and update this position for the 2025 financial year as the need arises.
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