Nigeria moves to integrate Global Islamic Finance Standards

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Nigeria is taking concrete regulatory steps to integrate global Islamic finance standards into its financial reporting system, as the Financial Reporting Council of Nigeria (FRC) intensifies reforms under the Nigerian Financial Reporting Framework (NFRF).

At a stakeholder engagement in Abuja on Wednesday, the Executive Secretary of the Financial Reporting Council (FRC), Dr Rabiu Olowo, said the move follows the council’s decision to adopt standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), aimed at strengthening compliance, transparency and regulatory oversight of Islamic and non-interest financial institutions in the country.

He said the initiative is aimed at strengthening regulatory clarity and investor protection, while positioning Nigeria as a leading hub for Islamic finance in Africa.

Olowo stressed that broad stakeholder engagement is critical to the successful integration of the standards, noting that it would help identify practical implementation challenges, build market capacity and foster shared ownership of the reform process among regulators, financial institutions, preparers, insurers and users of financial statements.

He explained that Islamic finance institutions operate on principles that differ fundamentally from conventional financial systems, particularly in areas such as interest prohibition, risk-sharing, asset-backed financing and ethical investment.

“These differences make it important for us to coordinate closely with stakeholders to effectively integrate the standards and innovations of Islamic finance institutions,” Olowo said, adding that the framework would ensure financial reports faithfully reflect the substance of non-interest transactions, including governance and disclosure requirements.

According to him, adopting the AAOIFI standards will enhance transparency, accountability, comparability and consistency in financial reporting across Nigeria’s non-interest finance sector, while strengthening market discipline and boosting investor confidence.

Olowo also noted the growing global acceptance of Islamic finance beyond traditional markets, citing examples such as the issuance of Sukuk and other non-interest instruments in countries like the United Kingdom. He said this trend presents opportunities for Nigeria to attract cross-border capital flows into the sector.

He clarified that the adoption of the standards is not intended to disrupt existing financial operations, but rather to improve clarity, credibility and regulatory certainty for institutions offering non-interest financial products.

The FRC executive secretary added that the council is collaborating with government agencies and market stakeholders to provide technical assistance, training, capacity building and implementation support.

He said continuous consultation would be maintained to ensure a smooth transition and the long-term sustainability of the new reporting framework.