FRC Reaffirms Confidence In Naira Amid Inflation

Financial Reporting Council of Nigeria (FRC) has reaffirmed its confidence in the strength of the naira, citing strong investors’ appetite for local currency assets despite ongoing inflationary pressures and currency volatility.

The FRC defending its decision not to apply IAS 29: Financial Reporting in Hyperinflationary Economies, noted that key economic indicators do not support a hyperinflation classification for Nigeria.

Among these, the Council pointed to sustained demand for naira-denominated investments, particularly government securities, as evidence of continued trust in the local currency.

According to the report, February 2025 saw a N670 billion treasury bills issuance oversubscribed to N3.1 trillion, while the federal government’s savings bond in April attracted N1.135 trillion and N3.2 trillion in subscriptions for its 2-year and 3-year tenors, respectively.

“This strong appetite for naira assets underscores that Nigerians continue to transact and invest in local currency. It indicates a significant level of confidence in the naira, contradicting assumptions of widespread dollarisation or a flight to hard assets” the Council said.

It furthered that “nothing has changed compared to the previous position of the Council, as monetary amounts are predominantly regarded in terms of the Nigerian Naira by the general population and not in terms of any other foreign currency.

The FRC’s remarks come as part of its addendum to a January 2025 release, following Nigeria’s economic rebasing and the IMF’s latest World Economic Outlook, which revised inflation figures slightly downward.

Despite a cumulative three-year inflation rate of 107.02 per cent, the Council concluded that other critical indicators such as the public’s valuation of money, pricing habits, and the linkage of wages and prices to inflation indices, do not support a hyperinflationary classification.

Consequently, it concluded that Nigeria is not yet a hyperinflationary economy due to the positive economic outlook that has strengthened the Council’s earlier position. “Therefore, IAS 29 should not be applied in the preparation of financial statements for the 2025 financial year. The FRC will continue to monitor economic developments and update this position when necessary.”

However, the Council noted that it would continue monitoring economic trends and could revise its position if inflationary pressures escalate.