The Financial Reporting Council of Nigeria (FRC) says Nigeria is not yet an hyperinflation economy and citizens have confidence in its local currency.
The council said this on Wednesday in statement signed by the Executive Secretary/Chief Executive Officer, Dr Rabiu Olowo.
The council noted that the International Accounting Standard (IAS) 29 which borders on Financial Reporting in Hyperinflationary Economies should not be applied in the preparation of financial statements for the 2024 financial year.
The News Agency of Nigeria (NAN) reports that hyperinflation is a period of rapid and extreme inflation that causes the value of a country’s currency to decrease.
IAS 29, Financial Reporting in Hyperinflationary Economies, on the other hand establishes rules for reporting financial information in economies with hyperinflation.
According to it, determining hyperinflation requires significant judgment and consideration of all relevant indicators.
It said that after thorough analysis of indicators, the FRC concluded 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,” FRC said.
The council explained the regulatory role of FRC and how the it extensively engaged relevant stakeholders for objective evaluation of the five indicators to study inflationary trend in the country.
It also explained how and when indicators for determining hyperinflationary economies were application and where not applicable because confidence levels in Naira remained high.
The councim added that the FRC’s analysis of these indicators for Nigeria was that, “the general population prefers to keep its wealth in non-monetary assets or in 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 in any other relatively stable foreign currency,” it added.
The council added that data from the Central Bank of Nigeria (CBN) and the financial statements of Nigerian financial institutions continued to show that investment in monetary assets had been on the increase for three years.
It listed examples of such money assets to include treasury bills, mutual funds, fixed and current deposits and other short-term monetary assets.
The council noted that pension assets mostly denominated in Naira had also been on the rise and totaled N22.25 trillion as at November 2024 compared to N18.35 trillion as at December 2023.
It said that salaries and wages for labour, goods and services and major e-commerce platforms and shopping malls in Nigeria such as Jumia, Slot, Konga, Jiji all transacted in Naira.
The council maintained that indices used for determining hyperinflation based on contracts or purchases on credit were not accurate as the Naira’s stability depended on various other factors including the minimum wage.
“In Nigeria, historical evidence shows that minimum wage when negotiated, remain fixed for average of 4 to 5 years and are not updated on annual basis.
For example, in 2019, minimum wage increased from N18,000 to N30,000 after 8 years since the last revision.
“The minimum wage remained N30,000 until July 2024 when it was increased to N70,000 after another five years,”
According to it, on interest rates, the CBN has increased the monetary policy rate over time in a bid to curtail inflation.
It reeled out both fiscal and monetary policy reforms yielding results aimed at controlling the money supply and curbing inflationary pressures.
