The Financial Reporting Council of Nigeria (FRC) has announced plans to incorporate international standards for Islamic finance into the country's financial reporting system. This move aims to better accommodate non-interest financial institutions and position Nigeria as a prominent hub for Islamic finance across Africa.
The initiative, revealed by FRC Executive Secretary Dr. Rabiu Olowo during a stakeholders' engagement in Abuja on Wednesday, builds on the council's earlier announcement last year to adopt guidelines from the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
AAOIFI is the leading global standard-setting body for Sharia-compliant financial products and services.Islamic finance operates on principles that prohibit interest (riba), emphasize risk-sharing, asset-backed transactions, and ethical investments—differences that are not fully addressed by conventional frameworks like International Financial Reporting Standards (IFRS), which Nigeria already follows.
Adopting AAOIFI standards will provide tailored guidance for reporting on instruments such as sukuk (Islamic bonds), takaful (Islamic insurance), and other non-interest products, ensuring greater transparency, consistency, and comparability.
Dr. Olowo emphasized that the integration will complement existing IFRS practices rather than replace them. "Adopting the AAOIFI standards will enhance transparency, accountability, comparability and consistency in financial reporting across Nigeria’s non-interest finance sector, while strengthening market discipline and boosting investor confidence," he said.
The FRC highlighted several key benefits, including improved regulatory clarity, enhanced investor protection, greater credibility for Nigerian Islamic financial products internationally, and support for financial inclusion by catering to segments of the population preferring Sharia-compliant options.
Officials stressed that the changes will not disrupt current operations but will strengthen the overall framework.Stakeholders, including representatives from non-interest finance institutions such as Dr. Basheer Oshodi, expressed support for the plan.
Dr. Oshodi noted that implementation is targeted to begin in the first quarter of this year, following ongoing consultations to ensure smooth integration.
The rapid growth of Islamic banking, sukuk issuances, and other non-interest products in Nigeria has made this step necessary to align reporting with global best practices while respecting local needs.
By aligning with AAOIFI, Nigeria joins other jurisdictions that have adopted these standards to foster a more inclusive and competitive financial ecosystem.
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