Financial Reporting Council to integrate Islamic finance standards into Nigerian Framework

The Financial Reporting Council (FRC) of Nigeria has announced plans to integrate the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards into the national financial reporting framework, a move aimed at enhancing transparency, accountability, and investor confidence in the country’s growing Islamic finance sector.

Speaking at a stakeholder engagement on Wednesday in Abuja, Rabiu Olowo, Executive Secretary/CEO of the FRC, emphasised that Islamic finance operates on principles distinct from conventional banking, including interest prohibition, risk-sharing, and ethical investments.

“As you are aware, Islamic finance institutions operate on principles that are fundamentally different from the conventional norms, particularly in areas relating to interest prohibition, risk-sharing, asset-gathering, and ethical investments. We recognise this difference.

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“And that is why we thought it important to coordinate this programme today with the stakeholders to see how we can integrate the standard and numerous innovations of these Islamic finance institutions. The unique characteristics of the state-specialised financial reporting, including governance, disclosure standards, and faithfully reflect the substance of the transactions.

“We announce our intention to integrate these standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions, (AAOIFI), into the Nigerian financial reporting framework, specifically to cater for Islamic finance and non-interest finance institutions and services operating in Nigeria,” Olowo said.

He noted that AAOIFI standards are internationally recognized and widely adopted across jurisdictions with established Islamic finance markets. Integrating these standards, Olowo explained, will strengthen comparability, consistency, and regulatory clarity in the reporting practices of non-interest finance institutions operating in Nigeria.

The initiative also aligns with the FRC’s investor protection mandate, promoting financial inclusion and supporting cross-border accessibility for Islamic finance programs.

Olowo highlighted that the integration process will involve technical assistance, capacity building, and training for stakeholders, including banks, insurers, and preparers of financial statements, to ensure smooth implementation.

“This initiative is not intended to disrupt existing operations but to enhance clarity, credibility, and regulatory certainty for institutions offering Islamic finance products. The success of this reform depends on the active participation and expertise of all stakeholders,”Olowo said.

The FRC intends to adopt a transition model for implementation, encouraging constructive feedback and a sense of shared ownership in the reform process.

According to the council, the move represents a strategic milestone in aligning Nigeria’s financial reporting framework with global best practices while accommodating the country’s unique market needs.

Stakeholders present at the engagement, including representatives from Islamic finance institutions and regulatory bodies.