By Ayobami Okerinde

Nigeria’s inflation crisis is already distorting financial reports and should no longer be treated as a future risk but a present reality, according to financial reporting expert and columnist Aina Gbolahan.

His warning comes amid mounting concerns that spiraling inflation is undermining the accuracy of financial statements across the country, even as regulators hesitate to declare Nigeria a hyperinflationary economy.

Over a three-year cumulative period, the inflation rate has crossed the 100 percent threshold, which triggers the need for adjustments under International Accounting Standard 29 (IAS 29).

At the heart of the problem is the use of historical cost accounting, which records assets at their original purchase value, according to Gbolahan who asserted that in today’s inflationary climate, that method is creating misleading impressions of institutional worth.

“Imagine a building bought for 100 million naira years ago. If inflation has more than doubled since then, that building might now be worth 300 million naira, yet on paper, it’s still recorded at the original price,” Gbolahan explained. “That disconnect creates a false image of a bank’s true asset base.”

IAS 29 calls for financial statements to reflect current purchasing power through price-index adjustments, including for income and expenses.

Without this recalibration, Gbolahan warned, companies may appear profitable while in reality suffering declining margins. “You might think you’re making a 200 naira profit on a sale, but when you adjust for inflation, the real margin might be closer to 50 naira. Without proper adjustment, the books are lying, not intentionally, but consequentially.”

“The impact of inflation also extends to cash holdings. A company holding one million naira during a 23.71 percent inflation period, for instance, would effectively lose 237,100 naira in purchasing power, something that should be reflected in financial disclosures.

“Budgeting has become increasingly unreliable as cost forecasts become outdated within months. A budget prepared in nominal terms today becomes obsolete in three months,” Gbolahan said, urging firms to plan in real terms and reassess capital adequacy, which is often overstated under inflation.

Recall the Financial Reporting Council of Nigeria (FRCN) maintained that the country has not met all conditions for classification as hyperinflationary, citing continued reliance on the naira and a lack of inflation-indexed contracts.

Gbolahan, however, believed the hesitation is costly. “I understand their caution, but the ground reality tells a different story. Inflation is eating into our financial clarity. Waiting for full-blown hyperinflation before taking action is a luxury we cannot afford.”

He is calling on financial institutions to move swiftly, reform internal systems, retrain staff, and adopt inflation-adjusted reporting to preserve trust and transparency.

“This is about integrity. It’s about ensuring investors, regulators, and the public aren’t misled, even unintentionally, by outdated accounting.”