Nigeria to Integrate Islamic Finance Standards into Financial Reporting Framework

The Financial Reporting Council of Nigeria (FRC) has announced plans to incorporate global Islamic finance standards into the Nigerian Financial Reporting Framework (NFRF).

The Executive Secretary of the FRC, Dr. Rabiu Olowo, disclosed this on Wednesday in Abuja, stating that the move is intended to improve regulatory clarity, strengthen investor protection, and position Nigeria as a major centre for Islamic finance in Africa.

According to Olowo, the initiative follows the council’s decision last year to adopt the standards of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) for Islamic and non-interest financial institutions operating in Nigeria. He said ongoing stakeholder engagements are aimed at ensuring a smooth and effective integration of these standards into the national reporting framework.

Olowo explained that Islamic finance operates on principles distinct from conventional finance, including the prohibition of interest, risk-sharing arrangements, asset-backed transactions, and ethical investment requirements. He noted that these differences require tailored reporting standards that accurately capture the substance of non-interest financial transactions.

He said the adoption of AAOIFI standards would improve transparency, accountability, comparability, and consistency in financial reporting within Nigeria’s non-interest finance sector, while also strengthening market discipline and investor confidence.

Olowo added that Islamic finance has gained wider acceptance globally, pointing to the issuance of Sukuk and other non-interest instruments in countries such as the United Kingdom.

He clarified that the new standards are not meant to disrupt existing financial reporting systems, but to enhance clarity, credibility, and regulatory certainty for institutions offering non-interest financial products.

Also speaking, Dr. Basheer Oshodi of the Non-Interest Finance Institutions of Nigeria said the initiative is focused on deliberately developing Islamic finance through clear guidelines. He noted that implementation is expected to begin in the first quarter of the year, adding that the framework will strengthen, rather than replace, the current financial reporting structure.