The Federal Government has initiated plans to integrate Islamic finance accounting and auditing standards into Nigeria’s financial reporting system — a strategic reform aimed at enhancing transparency, deepening financial inclusion and positioning the country as a leading hub for non‑interest finance in Africa.

Unveiled by the Financial Reporting Council of Nigeria (FRC) at a high‑level stakeholders’ engagement in Abuja, the initiative focuses on embedding global Islamic finance reporting standards into the Nigerian Financial Reporting Framework.

Bridging Global Standards and Local Practice

At the event held in Abuja, FRC officials explained that Nigeria’s current reporting landscape — grounded largely in conventional accounting rules — often falls short in capturing the unique features of Shari’ah‑compliant transactions such as profit‑and‑loss sharing, asset‑backed financing, sukuk (Islamic bonds) and takaful (Islamic insurance).

To address these gaps, regulators are adopting standards developed by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), a Bahrain‑based international standard‑setting body that has crafted specialised accounting, auditing, governance and ethics standards for Islamic finance institutions.

Experts say the adoption of AAOIFI standards will enable financial reports in Nigeria to more accurately reflect the economic substance of Shari’ah‑compliant operations, enabling investors, regulators and stakeholders to make better informed decisions.

Boosting Financial Inclusion and Investor Confidence

Nigeria’s Islamic finance sector has witnessed considerable expansion in recent years, driven by the growth of Islamic banking, sukuk issuances, takaful products and non‑interest capital market instruments.

However, many of these institutions have had to adapt conventional reporting practices to fit Shari’ah‑compliant transactions — a practice that experts say has constrained transparency and comparability.

By integrating AAOIFI standards alongside existing International Financial Reporting Standards (IFRS), the FRC aims to strengthen regulatory clarity, enhance reporting credibility and improve investor confidence in Islamic finance products offered within Nigeria’s financial system.

Regional and Global Implications

Adopting Islamic finance reporting standards aligns Nigeria with jurisdictions that have established robust non‑interest finance markets, including Bahrain, Saudi Arabia, Pakistan and Malaysia, where AAOIFI principles are widely applied.

Financial analysts say this reform could also boost Nigeria’s appeal to regional and international capital flows, particularly from investors seeking ethical and profit‑and‑loss sharing investment products rooted in Shari’ah principles.

Path Forward for Implementation

Officials emphasised that successful integration of Islamic finance standards will require broad stakeholder engagement, including capacity building for regulators, auditors, financial institutions and preparers of financial statements.

If fully implemented, the new reporting framework is expected to enhance Nigeria’s financial ecosystem by fostering greater transparency, accountability and global comparability — while supporting the continued growth of non‑interest finance as a vehicle for inclusive economic development.