The Effect of IFRS on Trade Balance in Nigeria
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Background of the Study
The International Financial Reporting Standards (IFRS) have been globally adopted as a set of high-quality accounting principles aimed at harmonizing financial reporting across borders. IFRS adoption is believed to enhance transparency, improve financial comparability, and foster global trade relations. Since its implementation in Nigeria in 2012, the accounting landscape has undergone significant changes, with potential implications for the country’s trade balance. Nigeria’s trade balance, a measure of the difference between its exports and imports, plays a pivotal role in economic growth. However, the linkage between IFRS adoption and trade balance remains underexplored, especially in developing economies like Nigeria.
Prior to IFRS adoption, Nigeria relied on local Generally Accepted Accounting Principles (GAAP), which were perceived as inadequate for providing investors and trade partners with confidence in financial disclosures. The introduction of IFRS was seen as a step toward aligning with global standards to attract foreign investments and enhance trade competitiveness. Literature suggests that IFRS adoption fosters cross-border trade by reducing information asymmetry and lowering the cost of capital. However, the impact of these benefits on Nigeria’s trade balance remains contentious.
Given Nigeria's reliance on crude oil exports and its vulnerability to external shocks, examining the effect of IFRS on trade balance is essential. Questions arise regarding whether IFRS adoption has contributed to improving export performance, reducing import dependency, or addressing trade deficits. This study aims to explore these dimensions, shedding light on the relevance of IFRS in shaping Nigeria's trade outcomes.
Statement of the Problem
While IFRS adoption is globally recognized for improving financial transparency and comparability, its impact on Nigeria’s trade balance remains unclear. Existing studies focus primarily on the general benefits of IFRS but seldom investigate its implications for trade-specific metrics in developing economies. In Nigeria, challenges such as inadequate implementation, limited financial literacy, and economic volatility complicate the potential benefits of IFRS for trade balance. This study seeks to address these gaps by examining the role of IFRS in influencing Nigeria's trade balance dynamics.
Aim and Objectives of the Study
The study aims to assess the effect of IFRS adoption on Nigeria’s trade balance. Specifically, the objectives are:
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To examine the impact of IFRS adoption on Nigeria’s export performance.
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To assess the relationship between IFRS adoption and import dependency in Nigeria.
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To evaluate how IFRS adoption influences Nigeria’s trade deficit.
Research Questions
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How has IFRS adoption impacted Nigeria’s export performance?
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What is the relationship between IFRS adoption and import dependency in Nigeria?
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In what ways has IFRS adoption influenced Nigeria’s trade deficit?
Research Hypotheses
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IFRS adoption has a significant positive impact on Nigeria’s export performance.
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There is a significant relationship between IFRS adoption and import dependency in Nigeria.
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IFRS adoption significantly influences Nigeria’s trade deficit.
Significance of the Study
This study is significant as it provides insights into the economic implications of IFRS adoption, specifically in the context of trade balance. Policymakers, businesses, and financial regulators can leverage these findings to enhance trade policies, strengthen Nigeria's export competitiveness, and address trade imbalances.
Scope and Limitation of the Study
The study focuses on the effect of IFRS adoption on Nigeria's trade balance from 2012 to 2025. It examines export performance, import dependency, and trade deficit. Limitations include data availability, economic fluctuations, and variations in IFRS compliance across sectors.
Definition of Terms
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IFRS: A globally recognized set of accounting standards aimed at ensuring transparency and comparability in financial reporting.
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Trade Balance: The difference between a country's exports and imports over a specific period.
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Export Performance: The efficiency and effectiveness of a country's goods and services sold abroad.
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