As Nigeria battles rising inflation rates, which reached a near 30-year high of 34.8% in December 2024, the Financial Reporting Council (FRC) has reassured Nigerians that the country has not entered a hyperinflationary economy. In a statement signed by its Executive Secretary, Dr. Rabiu Olowo, the FRC clarified that the application of International Accounting Standards (IAS) 29, which governs financial reporting in hyperinflationary economies, is unnecessary for the 2024 financial year.
Rising Inflation: Key Drivers
According to the National Bureau of Statistics (NBS), inflation climbed from 34.6% in November to 34.8% in December, marking the fourth consecutive monthly increase. Key contributors to the surge include:
- Food Inflation: Food inflation, making up over 50% of Nigeria’s inflation basket, eased slightly to 39.84% in December, down from 39.93% in November.
- Core Inflation: Excluding volatile agricultural and energy products, core inflation rose to 29.28% in December 2024, compared to 23.06% in December 2023. Price increases in transportation, dining, and personal grooming were notable drivers.
FRC’s Stance on Hyperinflation
The FRC, after extensive analysis, concluded that Nigeria does not meet the criteria for hyperinflation as outlined in IAS 29. “Determining hyperinflation requires significant judgment and evaluation of all relevant indicators,” Dr. Olowo stated. “Our analysis confirms that Nigeria has not reached this threshold.”
The council highlighted the following findings to support its position:
- Confidence in Local Currency: Despite inflation, Nigerians continue to transact in Naira, with no significant shift to foreign currencies or non-monetary assets.
- Monetary Investments: Data from the Central Bank of Nigeria (CBN) indicates a steady increase in investments in Naira-denominated assets like treasury bills and mutual funds. Pension assets also rose significantly, from N18.35 trillion in December 2023 to N22.25 trillion in November 2024.
- Medium of Exchange: The Naira remains widely accepted for transactions, reflecting confidence in the local currency.
The FRC engaged various stakeholders, including professional accounting bodies, auditors, regulatory agencies, and public interest entities, to objectively assess Nigeria’s economic environment. The council’s findings were unanimously supported, affirming the inapplicability of IAS 29 for 2024 financial reporting.
While inflation remains high, the Central Bank of Nigeria (CBN) has projected a gradual decline as ongoing economic reforms begin to take effect. The removal of petrol subsidies, naira devaluation, and other fiscal policies instituted by President Bola Tinubu’s administration in 2023 are expected to stabilize the economy. Additionally, rising oil production, projected to reach 2.3 million barrels per day by mid-2025, is anticipated to boost foreign exchange reserves and market confidence.
Dr. Olowo emphasized that the FRC will continue to monitor economic developments and update its position if necessary. He reiterated that the council’s analysis aims to provide clarity and reduce uncertainty for businesses and stakeholders navigating Nigeria’s economic challenges.
The FRC’s clarification offers reassurance amid soaring inflation rates. With the Central Bank’s optimism about inflation easing and reforms taking effect, Nigeria’s economic trajectory remains a critical focus for policymakers and stakeholders. While challenges persist, the emphasis on fostering confidence in the Naira and ensuring economic stability highlights a pathway toward recovery.
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