Nigeria’s inflation rate not hopeless – FRC

The Financial Reporting Council of Nigeria (FRC) has insisted Nigeria’s seeming high inflation rate has not reached a state of hopelessness.

Managing Director of Financial Derivatives Company (FDC) Limited Bismarck Rewane, had earlier stated that the country’s inflation might be heading towards a point of inflection.

In a statement on Thursday signed by its Executive Secretary, Rabiu Olowo, Council said Nigeria is not yet a hyperinflation economy and citizens have confidence in its local currency.

The Council also said 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.

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 explained 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 it extensively engaged relevant stakeholders for objective evaluation of the five indicators to study inflationary trends in the country.

It also explained how and when indicators for determining hyperinflationary economies were applied and where not applicable because confidence levels in Naira remained high. The council 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.

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