FRC Seeks to Integrate Islamic Finance Standards into Nigerian Reporting Framework

• Olowo: Initiative will position country as credible hub for Islamic finance in Africa, strengthen investor confidence, market discipline, others

James Emejo in Abuja

Executive Secretary/Chief Executive, Financial Reporting Council of Nigeria (FRC), Dr. Rabiu Olowo, yesterday declared that it is prepared to integrate standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) into the Nigerian financial reporting framework.

Olowo said the move aimed to cater for Islamic Finance and Interest-Free Institutions and Services (IFIS) operating in the country, and represented a strategic milestone in deepening the nation’s financial framework and aligning it with global best practices, while respecting our local realities.

He spoke at the opening of a stakeholders’ engagement on the integration of Islamic finance standards into the Nigerian financial reporting framework, which was convened by FRC in Abuja.

He clarified that the initiative does not intend to disrupt existing operations, but to enhance clarity, credibility, and regulatory certainty for institutions offering Islamic finance products and services.

He added that the decision was in line with the council’s statutory mandate to develop, adopt, and enforce accounting and financial reporting standards in Nigeria.

Olowo said AAOIFI standards’ integration will position Nigeria as a credible hub for Islamic finance in Africa; enhance transparency, comparability, and consistency in financial reporting by IFIS; strengthen investor confidence and market discipline; promote cross-border acceptability of Nigerian Islamic finance products, and support financial inclusion and ethical finance. 

Olowo said, “Nigeria’s financial system continues to evolve in response to economic growth, financial inclusion, and the increasing sophistication of financial products and services. 

“One of the most notable developments in this evolution is the steady growth of Islamic Finance and Non-Interest Financial Services in Nigeria.

“As you are aware, Islamic Finance Institutions operate on principles that are fundamentally different from conventional finance, particularly in areas relating to interest prohibition, risk-sharing, asset-backing, and ethical investment. 

“These unique characteristics necessitate specialised financial reporting, governance, and disclosure standards that faithfully reflect the substance of such transactions.”                 

He further explained that AAOIFI standards remained internationally recognised and widely adopted across jurisdictions with developed Islamic finance markets, provide comprehensive guidance on financial accounting and reporting, Shari’ah governance and compliance, auditing and assurance ethics and professional conduct for Islamic finance operations.

The FRC chief executive stressed that “AAOIFI has responded positively to our request, and engagements have commenced to ensure a structured, phased, and context-appropriate integration of the standards, taking into account Nigeria’s regulatory and institutional environment.

“The Council sincerely appreciates the AAOIFI for the warm reception accorded to our team and for the willingness to support the Financial Reporting Council of Nigeria in the integration of AAOIFI standards into the Nigerian Financial Reporting Framework. We value this commitment and look forward to a productive and mutually beneficial collaboration.”

He added that the meeting was deliberately convened to carry stakeholders along from the beginning, noting that the success of the initiative depended on their understanding, buy-in, and active participation.

Essentially, engagement seeks to formally inform stakeholders of FRC’s policy direction on AAOIFI standards integration; clarify the scope, approach, and implementation roadmap; identify practical challenges, capacity gaps, and transition issues, receive constructive feedback and recommendations, and foster a sense of shared ownership of the reform process.

Going forward, he said the council will consider a phased adoption and implementation timeline; extensive training for preparers, auditors, regulators, and users of financial statements; continuous stakeholder engagement and public consultation; alignment with existing Nigerian laws and prudential regulations as well as close coordination with sector regulators and professional bodies.