A look at current financial reporting issues

Overview

In 2016, the Nigerian economy dipped into a recession which saw the Naira deteriorate significantly against major currencies at the foreign exchange (FX) market until the Central Bank of Nigeria (“CBN”) intervened in 2017.

In a bid to maintain FX liquidity while simultaneously allowing investors to trade their own dollars at a more market-determined rate, the CBN created different windows for various segments of the economy with foreign currencies trading in these windows at different rates thus leading to a multiple exchange rate system.

This necessitated the need to consider the appropriate exchange rates for converting and translating foreign denominated transactions and balances for Nigerian businesses and foreign investments into Naira in accordance with International Financial Reporting Standards (IFRS).

On 14 June 2023, the CBN announced operational changes to the FX market which essentially abolished the multiple official FX windows and collapsed these into the I&E window with the reintroduction of the "Willing Buyer, Willing Seller” model.

This publication focuses on the financial reporting implications of reintroduction of the floating FX rate in Nigeria on Nigerian businesses and foreign investments into Nigeria.