FRC Refutes Hyperinflation Status of Nigeria’s Economy

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According to the Financial Reporting Council (FRC), Nigeria’s economy does not meet current criteria for being considered hyperinflationary.

Rabiu Olowo, the CEO of the FRC, stated in a statement on Wednesday that local businesses will not use the international accounting standard (IAS) 29 in their financial reports for 2024.

Financial reporting is governed by a set of guidelines called the IAS.

According to Olowo, the FRC determined that the standard does not apply after evaluating Nigeria’s economy using the five indicators in “IAS 29: Financial Reporting in Hyperinflationary Economies.”

According to him, IAS 29 defines accounting standards for hyperinflationary economies, citing signs including pricing in stable currencies, reliance on non-monetary assets, and a cumulative three-year inflation rate that is close to or more than 100%.

Nigeria does not match the majority of the criteria, according to the CEO, who summarized the five IAS 29 factors.

He stated that the majority of people would rather hold their wealth in non-monetary assets or in a foreign currency that is comparatively stable.

“To preserve purchasing power, the amount of local money held is promptly invested.

The general public views monetary quantities in terms of a comparatively stable foreign currency rather than the local currency. That currency may be used to quote prices.

Even if the credit duration is brief, sales and purchases made on credit are made at prices that make up for the anticipated decline in purchasing power.

“A price index is linked to prices, wages, and interest rates.”

But according to Olowo, Nigeria satisfies the requirement for a three-year cumulative inflation rate that is close to or higher than 100%.

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According to him, Nigeria’s economic prospects would improve and inflation would be lessened with the operationalization of the Dangote refinery as well as the Port Harcourt and Warri refineries.

The FRC stated that the improved trajectory would also be supported by import policies, agricultural initiatives, increasing crude oil output, and structural reforms.

Olowo went on to say that the FRC will keep an eye on economic developments and, if needed, revise its position for the fiscal year 2025.

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