The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, on Thursday said the Nigerian banking and financial system are currently reaping the fruits of the adoption of the International Financial Reporting Standards (IFRS).
He said this was evidenced by the growth sizes and scope of the operation of banks, locally and globally adding that over 55 subsidiaries, three branches and four representative companies are currently spread across 30 countries.
Speaking at the opening of the Regulatory Roundtable on the Implementation of ISSB’s Sustainability Standards in Nigeria, which was organized by the Financial Reporting Council (FRC) of Nigeria, in Abuja, the CBN governor, further acknowledged that foreign investments and credit facilities had grown into the system over the years.
The IFRS are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB), and constitute a standardised way of describing the company’s financial performance and position so that company financial statements are understandable and comparable across international boundaries. They are particularly relevant for companies with shares or securities publicly listed.
Cardoso pointed out that these reporting standards have ensured that Nigerian companies could provide globally competitive financial statements, a development which has continued to attract foreign investment into the economy.
Represented at the occasion by CBN Deputy Director, Payments System Policy and Oversight Function, Dr. Musa Jimoh, the central bank governor, expressed optimism that the proposed implementation of IFRS S1 and IFRS S2 in the country would equally be successful.
Essentially, IFRS S1 applies to sustainability-related financial disclosures while IFRS S2 Climate-related Disclosures sets out specific climate-related disclosure requirements for a company to disclose information about its climate-related risks and opportunities.
He said the CBN remained at the forefront of ensuring adequate disclosure by banking industry operators, adding that such disclosure ensures that entities make available all relevant financial information to the stakeholders in a transparent manner.
Cardoso said, “It is only a transparent and regulated framework that supports confidence in the system”, adding that financial integrity will boost confidence between regulators, investors and the public.
He said the CBN had been issuing circular guidelines for disclosure requirements to the banking system for many years, ranging from minimum content in audited financial statements to insider-related credits and sustainable banking practices, among others.
He said the CBN had emphasised on sustainability banking practice in 2020 in collaboration with the Bankers’ Committee, adding that the principles have had a salutary effect on the “way our banks and other financial institutions conduct their operations within and outside Nigeria”.
According to him, these principles were meant to promote environmentally responsible and socially relevant economies by understanding and appropriately managing environmental and social risks and opportunities associated with banks’ respective business activities and operations, among others.
The CBN governor stressed that sustainability reporting had become an integral part of the disclosure of empowerment in banking’s audited financial statements.
He said banks are required to make disclosure on their provision of financial products and services to their clients in the power, agriculture and oil and gas businesses.
He added that the implementation of the sustainable banking principles in Nigeria presented a vital conduct in businesses, which showed the positive and the negative impact of their operation on the society and the environment.
Cardoso also admitted that the journey to the implementation of the new standard for executing major operating changes had never been easy, pointing out that IFRS2 was required to address climate-sensitive requirements, such as disclosure that recognizes fiscal and transactional risks, and setting climate-related targets and disclosure plans to respond to climate-related risk and opportunities.
He said entities are expected to also create scenarios, analyze and test how various climate-related events impact its future operation, as well as set metrics for disclosure, adding that this requires technical expertise, data, and resources, which may not be readily available.
The CBN governor, therefore, tasked the regulators including the FRC that in setting an adoption roadmap for the implementation of the sustainable financial standards, apparent challenges should be considered.
In his remarks, Executive Secretary/Chief Executive, FRC, Dr. Rabiu Olowo, said the roundtable was both timely and significant as the regulators embark on an essential mission to embed sustainability reporting into the core of the country’s business practices.
He said Nigeria had taken a pioneering role by adopting the ISSB standards, positioning it as a leader in Africa, adding that collaboration was crucial for ensuring successful implementation of these standards.
Olowo said the ISSB framework offered a groundbreaking approach for organisations to disclose climate-related risks and opportunities, enhancing transparency, consistency, and informed decision-making.
He said by embracing these standards, “we can unlock capital investments, stimulate innovation, and safeguard our environment for future generations.”
According to him, the ISSB standards provide a global baseline for sustainability reporting, promoting comparability, transparency, and accountability-qualities that have often been lacking in the past.
He stressed that previously, sustainability reporting was marred by a lack of these characteristics, with entities reporting only what was normative to them, rather than adhering to prescriptive best practices.
According to him, this often led to reports that lacked the rigor and transparency expected of general-purpose financial reporting.
On the milestones so far achieved towards the adoption of the new standards, the FRC boss said, “We have recently moved through the Early Adoption Stage, with some listed entities demonstrating leadership in reporting their sustainability-related risks and opportunities using IFRS S1 and IFRS S2.
“Notable examples include Access and Fidelity Banks in the financial services sector, Seplat Energy in the oil and gas sector, and MTN in the telecommunications industry. We have now entered the voluntary stage, which will run from 2024 to 2027, serving as a learning curve in preparation for the mandatory period beginning in 2028.”
He said, “As we advance, it is crucial to encourage industry-wide participation and foster a collective commitment to sustainability reporting. By monitoring progress and sharing best practices, we can identify areas for improvement, celebrate successes, and drive continuous enhancement.
“Through our collaborative efforts, we can create a robust ecosystem that supports organizations in adopting sustainability reporting, ultimately contributing to a more resilient and sustainable future for Nigeria.”
James Emejo
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