EVALUATION OF COMPANY ASSET VALUATION PRACTICE IN

LAGOS, NIGERIA

BY

BALOGUN, MUJAIDEEN OLOLADE

(2020/9717)

A DISSERTATION SUBMITTED TO

THE DEPARTMENT OF ESTATE MANAGEMENT

COLLLEGE OF ENVIRONMENTAL SCIENCES

BELLS UNIVERSITY OF TECHNOLOGY, OGUN

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR

THE AWARD OF BACHELOR OF SCIENCE (B.Sc.) DEGREE IN

ESTATE MANAGEMENT

NOVEMBER, 2023
 CERTIFICATION

This is to certify that this research project was carried out by BALOGUN,
Mujaideen Ololade (Matriculation Number 2020/9717) towards the fulfillment
of the requirements for the award of a Bachelor of Science degree in Estate
Management in the College of Environmental Sciences, Bells University of
Technology.

…………………………………. ………………………………….

BALOGUN, Mujaideen Ololade Dr Oyedeji Oyewale

Project Supervisor

……………………………

Dr Oyedeji Oyewale Head of Department

DEDICATION
This work is dedicated to all academicians who work so hard to extend the
frontiers of knowledge and move society forward.

CHAPTER ONE
 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Every property undergoes valuation in order to ascertain its value or values, fulfill

predetermined objectives, and function as a tool for decision-making (Ashaolu &

Olaniran, 2016). For businesses all over the world, asset valuation is an essential

component of financial reporting and management since it influences decision-

making, stability in the financial system, and investor trust (Damodaran, 2012). In

Lagos, Nigeria, where the business environment is dynamic and changing quickly,

it is especially important to comprehend how businesses approach and carry out

asset assessment. The purpose of this study is to examine the various approaches

used by Lagos-based businesses and assess how well they capture the actual value

of their assets. Lagos has emerged as a major center for trade and industry as

Nigeria's economic environment has undergone substantial changes in recent years

(World Bank, 2019). The asset valuation procedures that businesses use become

critical as they function in this dynamic environment. Penman (2013) and other

scholars have drawn a direct correlation between the caliber of financial reporting

and the significance of precise and open valuation processes. As a hub for business

activity, Lagos provides a distinctive environment for examining how these

theories play out in actual business operations. Financial transactions and company

activities have become more complex as a result of Nigeria's economic expansion

and globalization trends, especially in Lagos (Oyerinde, 2017). Strong asset

assessment procedures are essential when businesses grow and take on a wider

range of operations. Academics such as Oyerinde highlight the significance of

precise valuations in enabling efficient decision-making, risk mitigation, and

financial planning for businesses functioning within such ever-changing contexts.

According to academics like Boubakari et al. (2019), foreign investment attraction

in emerging nations like Nigeria is contingent upon the quality of financial

reporting, which encompasses asset value. Gaining insight into how Lagosian

businesses manage this interplay between precise asset appraisal and foreign

investment will help illuminate the region's competitiveness and wider economic

ramifications.

Furthermore, asset valuation procedures become much more complicated due to

the regulatory environment in which Nigerian businesses operate. Prominent

regulatory organizations like the Financial Reporting Council of Nigeria (FRCN)

have established requirements, however it is still unclear how closely businesses

follow these rules (Ajibolade, 2016). The goal of this study is to examine how well

Lagosian enterprises' real asset assessment processes and legal frameworks match

up. Companies in Lagos may also approach asset valuation differently due to

cultural and market-specific considerations. Cultural nuances play a significant

role in determining business practices in Nigeria, as noted by scholars such as

Enahoro et al. (2018). Understanding the nuances of asset valuation in the context

of Lagos company requires an understanding of certain contextual elements.

1.2 STATEMENT OF RESEARCH PROBLEM

A complicated environment impacted by regulatory frameworks, technology

improvements, ethical issues, and economic growth is presented while evaluating

corporate asset valuation processes in Lagos, Nigeria. Still, there is a significant

knowledge vacuum on the ways in which these variables interact to affect asset

assessments' efficacy and accuracy, which makes it more difficult for businesses to

present accurate and transparent financial data. Although organizations like the

Financial Reporting Council of Nigeria (FRCN) have established regulatory rules,

it is unknown how much Lagos-based businesses follow these guidelines when

valuing their assets (Ajibolade, 2016). Moreover, KPMG (2018) has drawn

attention to the swift technology advancements in the global business landscape,

which pose concerns over the applicability of contemporary valuation techniques

to Lagos-based enterprises.

The ethical aspects of asset assessment are also a research problem, reiterating

worries expressed by Velury and Jenkins (2006). To guarantee the accuracy and

dependability of financial reporting, a closer look at the possible conflicts of

interest and moral conundrums related to Lagos asset valuation processes is

necessary.

Furthermore, although research such as that conducted by Osazevbaru and Enaholo

(2019) highlights the influence of the Nigerian capital market on valuation

methodologies, a thorough comprehension of how firms harmonize their

assessments with the dynamics of the Lagos market is still elusive.

Therefore, the main study challenge is to examine the complexities of Lagos-based

corporate asset valuation procedures, taking into account the gaps in technological

integration, legal compliance, ethical considerations, and alignment with capital

market expectations. Through filling in these gaps, the study hopes to offer

insightful information that would improve asset appraisals' efficacy, dependability,

and transparency for Lagosian businesses thus promoting a stronger financial

reporting climate.

1.3 RESEARCH QUESTIONS

This paper investigates the following research questions against the

aforementioned backdrop.

a. How efficiently and promptly do companies in Lagos, Nigeria, execute the

process of asset valuation, and what factors contribute to variations in the

execution speed?
 b. What are the primary purposes and objectives that drive companies in

Lagos, Nigeria, to conduct asset valuation, and how do these purposes vary

across different industries and organizational sizes?

c. What are the primary challenges faced by companies in Lagos, Nigeria, in

the process of asset valuation, and how do these challenges impact the

accuracy, reliability, and consistency of valuation outcomes?

d. To what extent do estate surveyors and valuers in Lagos, Nigeria, possess

the necessary skills and knowledge required for proficient company asset

valuation, and how do their qualifications and professional experiences

contribute to the effectiveness of asset valuation practices?

1.4 RESEARCH AIM AND OBJECTIVES

The primary aim of this research is to comprehensively examine the practices of

company asset valuation within the business landscape of Lagos, Nigeria, with the

goal of enhancing understanding and contributing to the improvement of

transparent and effective financial reporting. The specific objectives are stated as

follows.

a. To assess the rate of execution of company asset valuation in Lagos, Nigeria.

b. To examine the purposes of company asset valuation in Lagos, Nigeria.

c. To assess challenges of company asset valuations in Lagos, Nigeria.

d. To assess the skills and knowledge of estate surveyors and valuers in

company asset valuation.

1.5 RESEARCH HYPOTHESIS

First Hypothesis: Accurate Asset Valuation and Regulatory Compliance

Hypothesis Null (H0): According to the Financial Reporting Council of Nigeria

(FRCN), there is no discernible correlation between the degree of regulatory

compliance and the accuracy of asset values among Lagos-based businesses.

Hypothesis Alternative (H1): According to FRCN rules, there exists a positive

correlation between the accuracy of asset assessments and a higher level of

regulatory compliance in enterprises situated in Lagos.

The purpose of this hypothesis is to investigate if companies that follow regulatory

norms more closely exhibit more accurate asset appraisals.

1.6 JUSTIFICATION OF THE STUDY

The potential impact of this study on company asset valuation practices in Lagos,

Nigeria is substantial and justifies its pursuit. It can guide business decision-

making, address ethical concerns, inform regulatory frameworks, improve financial

transparency, attract investments, and aid in the adaptation of companies to

technological advancements. By looking at present practices, the research hopes to

solve ethical issues, guarantee that firms in Lagos continue to be technologically

adaptable, improve regulatory compliance, boost corporate decision processes, and

promote the attractiveness of enterprises to investors. By encouraging a culture of

integrity and efficiency in asset appraisal, the study ultimately aims to promote

financial practices in the fast-paced commercial climate of Lagos.

1.7 THE STUDY AREA

Study Area Overview:

Lagos is renowned for its diverse and dynamic business environment, attracting

both local and international companies across various industries. The city's

economic significance is underscored by its role as a major contributor to Nigeria's

Gross Domestic Product (GDP) and its status as a hub for finance, trade, and

technology. The regulatory landscape in Lagos, governed in part by the Financial

Reporting Council of Nigeria (FRCN), provides a structured framework for

financial reporting and valuation practices (Ajibolade, 2016). However, the study

area presents an intriguing context where companies must navigate regulatory

guidelines while adapting to the rapid changes in the global business landscape.

Technological advancements play a crucial role in shaping business practices

globally, and Lagos is no exception. As highlighted by KPMG (2018), the

integration of technology in valuation methodologies is a key trend. Exploring how

Lagos-based companies embrace and incorporate technological innovations into

their asset valuation processes adds a contemporary dimension to the study.

In summary, the study area of evaluating company asset valuation practices in

Lagos, Nigeria, is characterized by a multifaceted business environment influenced

by regulatory frameworks, technological trends, capital market dynamics, and

cultural diversity. The interactions between these factors shape the landscape in

which companies operate and provide a compelling context for investigating the

complexities of asset valuation practices in this dynamic and influential city.

 CHAPTER TWO

LITERATURE REVIEW

2.1 CONCEPUAL FRAMEWORK

The framework used to assess corporate asset valuation procedures in Lagos,

Nigeria, is multidisciplinary in nature, incorporating concepts from the fields of

accounting, business management, and finance. Fundamental to it is following the

International Accounting Standards Board's (IASB) global financial reporting

standards (IFRS) (IASB). The International Financial Reporting Standards (IFRS)

offer a universally accepted framework for financial reporting that guarantees

uniformity and openness in asset assessment and disclosure. In the field of

corporate governance and financial reporting, Shleifer and Vishny's (1997) work is

crucial. Their investigation examines the connections between corporate

governance frameworks and financial practices offers insightful information about

how governance practices could affect Lagos company valuation procedures.

This study's primary topic, asset valuation, benefits from well-established methods

proposed by academics such as Penman (2007) and Damodaran (2012). Penman

provides a theoretical framework for comprehending the complexities of asset

valuation through his research on valuation models, especially those that take book

value and earnings into account. The conceptual framework is enhanced by

Damodaran's contributions, which include a variety of valuation approaches and

offer a full toolkit for evaluating the value of a company's assets. This study

examines the impact of culture on business operations in Lagos using the

frameworks created by Hofstede (1980) and Trompenaars (1993). Given the great

cultural diversity of Lagos, their study on cultural aspects offers a comprehensive

knowledge of how cultural influences may influence the valuation techniques

selected by businesses operating in the city.

The regulatory environment and adherence to professional standards are critical

components of the framework. Tricker's (2012) examination of corporate

governance principles and Nobes' (2006) insights into accounting standards help us

understand the role of regulatory bodies and professional associations like the

Institute of Chartered Accountants of Nigeria (ICAN) and the Financial Reporting

Council of Nigeria (FRCN) in shaping asset valuation practices.

The conceptual framework, by combining various views, provides a

comprehensive lens through which to examine the intricate dynamics of corporate

asset valuation in Lagos, Nigeria. The combination of these disparate elements

provides a solid foundation for comprehending the various factors that impact and

define asset valuation processes in today's volatile business climate.

2.2 THEORETICAL FRAMEWORK

The theoretical framework for evaluating corporate asset valuation practice in

Lagos, Nigeria focuses on several major concepts and theories from finance,
accounting, and organizational behavior. These theoretical underpinnings give a

platform for understanding the dynamics, problems, and influencing variables that

affect asset valuation procedures in Lagos. The Agency Theory is a key theoretical

framework that underlies this investigation. The Agency Theory, which evolved

from foundational works by Jensen and Meckling (1976), investigates the

interactions between principals (business owners) and agents (management or

professionals involved in asset valuation). In the context of Lagos, this theory aids

in the clarification of potential agency issues that may occur during the value

process. Understanding agency relationships is essential for determining how

organizations align the interests of various stakeholders in their asset appraisal

methods.

Spence's (1973) signaling theory is also pertinent to the investigation. According to

signaling theory, corporations use specific activities, such as adopting certain asset

valuation methods, to indicate information about their financial health and future

prospects to external stakeholders. Understanding how organizations signal their

financial condition through asset valuation processes in Lagos contributes to a

greater understanding of the information provided to investors, regulatory

authorities, and the broader business community. Barney's (1991) Resource-Based

View (RBV) thesis is useful in assessing how businesses use their distinctive

resources and capabilities to gain a competitive advantage. When applied to asset

valuation procedures in Lagos, RBV elucidates why organizations may select

specific valuation methods or tactics based on internal capabilities and the external

competitive situation. This idea contributes to understanding how companies in

Lagos employ their resources to improve asset value effectiveness.

Furthermore, DiMaggio and Powell's (1983) Institutional Theory is relevant to

understanding the influence of institutional forces and norms on corporate conduct.

In Lagos, institutional elements such as regulatory agencies such as the Financial

Reporting Council of Nigeria (FRCN) and professional groups such as the Institute

of Chartered Accountants of Nigeria (ICAN) create the climate in which businesses

function. Examining the institutional structure reveals how these external factors

influence asset appraisal procedures.

The theoretical framework also includes cultural and geographical considerations.

Hofstede's (1980) work on cultural aspects and Oyewobi et al. (2012) work on

regional impacts give a lens through which to examine how cultural and regional

factors influence the choice of asset valuation methodologies in Lagos. By

identifying the socio-cultural context in which asset valuation activities take place,

these cultural subtleties contribute to the broader theoretical framework.