The Federal Government has taken a strategic step toward incorporating Islamic finance accounting and auditing standards into Nigeria’s financial reporting framework, an effort aimed at improving transparency, boosting financial inclusion and positioning Nigeria as a leading centre for non-interest finance in Africa.
Unveiled during a stakeholders’ engagement in Abuja on Wednesday, the initiative was led by the Financial Reporting Council of Nigeria (FRC) and marks a significant shift toward recognising the unique reporting needs of Islamic finance institutions within the national system.
Under the plan, Nigeria will integrate standards developed by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), a Bahrain-based international body created in 1991 to set accounting, auditing, governance, ethics and Shari’ah compliance standards for Islamic finance. These standards are specifically designed to address financial transactions that differ fundamentally from conventional banking, such as profit-and-loss sharing arrangements, asset-backed financing, sukuk (Islamic bonds) and takaful (Islamic insurance), which are not fully covered by existing reporting frameworks.
AAOIFI standards are widely used in countries with established Islamic finance markets, including Bahrain, Saudi Arabia, Pakistan, Sudan and Indonesia, and parts of the Gulf Cooperation Council. Other jurisdictions, such as Malaysia and the United Kingdom, also apply these standards alongside International Financial Reporting Standards (IFRS).
In Nigeria, Islamic finance institutions have historically reported under conventional accounting rules, often adapting them to fit Shari’ah-compliant activities. The new integration is expected to close those gaps, strengthen the credibility of financial reporting, and align the country’s non-interest finance sector with global best practices, all while maintaining conformity with local regulations.
