ANALYSIS OF ADHERENCE TO VALUATION STANDARDS AND PROPERTY VALUE CERTIFICATION BY ESTATE SURVEYING AND VALUATION FIRMS IN LAGOS, NIGERIA

ABSTRACT

The issue of professional valuation standards and the quality of valuation reports has been the focus of considerable attention not only in Nigeria but also internationally in recent years. The aim of this study is to investigate the level of adherence to valuation standards and property value certification by Estate Surveying and Valuation firms in Lagos, Nigeria with a view to establishing a mechanism for improving compliance level to valuation standards and property value certification in Nigeria. A mix survey approach of descriptive and inferential statistics was adopted in collecting data for this study. The study was also complemented with the content analysis approach of valuations reports retrieved from the study area which was used to adjudge extent of compliance to property value certification with prescribed valuation standards. The data gathered through a structured questionnaire and content analysis of 100 retrieved valuation reports was also used. Result of analysis shows that the level of awareness to valuation standard was 97%. It further shows that the extent of adherence was 95%, while 26% do not use any valuation standard manual. Furthermore, 45% of respondents do not include property value certification statement in their report in compliance with minimum reporting standard. The study also revealed that the relationship between the level of adherence to valuation standard and property value certification have a strong positive correlation which interprets that the two variables are positively related and move in the same direction; but at slightly different magnitude. The study recommended that the regulatory body should follow up the set standards in the Green book by enforcement and imposition of sanctions on the erring members after maximum awareness of and use of the Green book must have been created among the members.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Matters relating to valuation standards and valuation reports nature have become the canter of substantial notice not only in Nigeria but also internationally in recent years. The first emergence of valuation standards nationally was an effort in addressing particular region period of monetary emergency established in property deals (Barry and Preston, 2005). It is for this reason among others, that valuers must be assisted through the valuation process in arriving at their valuation conclusions in an unbiased and impartial way as possible. This is the essential requirement for the improvement and adjustment of standards.

All-inclusive, the drive for standards and harmonisation which are generally adequate and applicable in professional practices has been the watchword for straightforwardness, consistency, soundness, comparability and uniform execution measures (Onuorah, 2009). In light of the acknowledgement to show significance of valuation benchmarks before regulators worldwide advancement of straightforwardness valuation, Nigerian Institution of Estate Surveyors and Valuers members now embraces international valuation standards in their practice as applicable globally (Adegboye, 2011).

The International Valuati0n Standard Council (IVSC) as a free non-benefit, private-sector organization that has the duty to serve the public interest came up with its objective to build sure and 0pen trust in valuation procedure that has made a framework for the delivery of dependable valuation conclusions via prepared valuation by skilled valuation experts behaving in a moral way. Incidentally, Nigeria have being one of the member countries of the International Valuation Standard Committee (IVSC), whereby maximum range of errors emergence in their valuation must be legitimately guided in terms of the acceptable and admissible percentage error (Onyeneke and Ekenta, 2018).

In Nigeria, NIESV burdened with duty of Estate Surveying and Valuation practice as experts having standards with guidance notes. The essential case of guidance n0tes 0n valuation in Nigeria came to being 1985 with a rethought in 2006, with its objective not completely achieved due to absent of far-reaching follow-up research to explore the level of Estate Surveying and Valuation Firms consistency with valuation standards at a National level (Gambo, 2014).

Odudu, (2015) advocated for a review and upgrade of the valuation standards currently being utilized by Nigerian Institution of Estate Surveyors and Valuers to international standards with need for Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) to urgently put in place a mechanism for monitoring and enforcing compliance. Babawale, (2012) also observed that professionals providing valuation services in the Nigerian real estate industry practice within a regulatory framework that was characterized by weakness in enforcing minimum standards and inability to keep pace with current trends, global best practices and international standards.

In spite of the existence of International Valuation Standards it has been seen that some countries where the profession has tried to enforce more rigorous mandatory standards backed by detailed guidance notes, Valuers still fall below the required standards (Wyatt, 2003).

As indicated by Babawale (2012), valuation standard serves as a professional benchmark or point making individuals provide a sustainable valuation in meeting financial rep0rting requirements f0r worldwide business class. The reason of the valuation standard in ensuring produced valuation reports maintain level benchmark of trust, plain and goals according to appropriate basis recognized for the specific reason. It is therefore evident that disp0sition 0f individual valuers with valuation firms would ultimately determine the full impact of the prescribed standards.

Based on this background the research work designed was for exploring need for enhancing the knowledge content and importance of valuation standards and property value certification with the sole aim of curbing old practices and suggest how best to undertake valuation practice to a globally acceptable level by Estate Surveying and Valuation firms in the nation.

1.2 Statement of Problem

The nonappearance of measures hints absence of demonstrable skill and establishes a potential wellspring of misuse, unremarkableness, carelessness and clashes (Babawale, 2012). Issues identifying with valuation norms accepted conspicuousness in the last quarter of the twentieth Century because of the monetary fiascos which was followed to a property-related exchange. All these property and monetary emergency were ascribed to low quality of valuation used to verify bank credits (Barry and Preston, 2005).

In Nigeria, regardless of the disappointment express by contract and money related establishments with the unwavering quality and consistency of valuers valuation practices, almost no exertion is seen to guarantee valuations by valuers are predictable, straightforward and adequate (Adegoke et al., 2011). While notwithstanding the 2006 Guidance Notes on valuation in Nigeria, the indiscriminate styles of completing valuation practice in Nigeria still continue (Odudu, 2015).

Valuation services provided within a regulatory framework by professional in Nigeria has been characterized by weakness in enforcing minimum standards and inability to keep pace with current trends, global best practices and international standards (Babawale, 2012).

According to Ajayi, (2009) many valuers do not have a copy of the IVS or NIESV standards, probably because they are not aware of either the IVS or the NIESV standards. This is ironic because every property value certification ought to be mandatory: This is to certify the valuation carried out was in accordance to valuation standards with NIESV 2006 guidance notes or some similar compliance statement where IVS was used.

The issue is likewise basic in light of the fact that the profession as it is today is confronting a firm challenge in all features of its conventional areas of practice, thinking about the way that the Engineers are fomenting to assume control over the plant and machinery valuation part of the profession (Ayedun, 2009).

Following the formal adoption of International Valuation Standards (IVS) in Nigeria aimed at instilling public confidence in the valuation process, there is a shortage of research on the degree of information and consistence of Nigeria valuers requirements of IVS which appears demanding is still very low among Nigerian valuation professionals. Therefore the research intends to investigate the extent Nigeria valuation practice and its compliance to international Valuation Standards and best practice.

1.3 Justification for the study

Standards in valuation as a study in Nigeria has been addressed in parts by the pioneering efforts of Aluko 2007, Ajayi 2009, Dugeri, Gambo and Ajayi 2012, Babawale 2012, Gambo 2014, Ayedun2016, Onyeneke and Ekenta 2018 and scarcely any others.

Similarly, Aluko (2007) maintained the ramification of the present pattern in mortgage valuation practice indicated that estate valuers are not reflecting fitting bases, technique and data contents in mortgage valuation. Ajayi, (2009) applied universal valuation gauges in the usage of the venture technique for valuation and in contract valuation and conclude that the awareness of and utilization of IVS (2007) and even the Standard and Guidance notes of NIESV (2006) is exceptionally low among Nigerian valuers and that no enforcement mechanism exists in the IVS for its standards.

Dugeri, Gambo and Ajayi, (2012) inspected degree 0f adhering universal standard valuation regionally which draws suggestions for applying IVSs within an increasing economies of Nigeria and uncovered that Nigeria as an emerging economy has not yet developed nor built up the requisite law and monetary detailing practice on which the IVS is built. Babawale, (2012) appraised the present standard professional valuation practice in the nation and investigation uncovered that the land valuation practice in the nation by and by misses the mark concerning universal guidelines and best practices.

Gambo, (2014) analyzed valuers reaction to valuation standards application in practice and findings uncovered 20% of valuers unaware about the existence of no valuation standards, while 54% consult none of the valuation standards manual in practice. Ayedun, (2016) maintained the prerequisite for adherence to professional morals and set of accepted rules by members of NIESV with the end goal for separating their presentation from those of non-members of the profession.

Orimalade, (2017) saw some Nigerian companies lack technical expertise to carry out certain jobs and financial muscle to secure necessary technology to carry out key valuation jobs while Onyeneke and Ekenta, (2018)surveyed the Nigerian valuation practice and compliance to International Valuation Standard and uncovered that Nigeria Valuation Practice has complied with the minimum standards in its reporting style/content by number of things as compared to Brazil, United States and the United Kingdom of which has provided better comprehension to improve the Valuation Practice as to build new certainty and trust in the profession.

The ongoing measures, as well as the suggested contributions, will yield the required developments in valuation practice standards only if member valuers and firms avail themselves of the impacts and are happy to receive vital changes by and by (Babawale, 2012).

Regrettably, earlier studies have pinpointed individual behavioural ways of the valuers as the main issue of valuation non-accuracy (Babawale, 2011), Wyatt (2003) even saw that in countries such as Britain where professions attempts to force progressively from compulsory standards backed up by definite guidance notes, valuers continue to drop beneath the prerequisite standards.

Furthermore, there is a developing interest for improved quality and straightforwardness in valuations and receiving universal benchmarks helps in fortifying and implementing the valuation assumptions exist and thereby elevate market confidence upon valuation process.

These kind of issues opened up hole to fill by fitting exploration from the viewpoint of the Nigerian estate valuation industry which this study tends to explore and improve to bridge the professional gap in Nigeria estate valuation by investigating adherence extent 0f valuation standards with property value certification presently attained and build recommendations towards improving degree of consistence to valuation standards and property value certification.

1.4 Aim and Objectives

The research aim is to investigate adherence level to valuati0n standards and property value certification by Estate Surveying and Valuati0ns firms in Lagos State with a view to setting up a mechanism for improving compliance level to valuation standards and property value certification in Nigeria.

In pursuit of this aim, the specific objectives of the study are to:

1. Identify valuation process employed by practicing Estate Surveying firms in Lagos.
2. Identify existing valuation standards with the extent of adherence by practicing Estate Surveying firms in study area.
3. Determine level of adherence to property value certification by practicing firms in study area.
4. Determine if extent of valuation standards adherence has a significant relationship with compliance to property value certification in study area.

1.5 Research Questions

The accompanying research questions are presented in the study:

1. What is the valuation process employed in arriving at a property value in Nigeria?
2. What is the existing valuation standards adhered in Nigeria?
3. What is the adherence level of property value certification in Nigeria?
4. What is the significant relationship between extent of adherence to valuation standards and compliance to property value certification in Nigeria?

1.6 Scope of the Study

Fundamental focal point of examination is to discover the current degree of adherence to valuation standard and property value certification practice in Nigeria. Be that as it may, time limitation does not take into account the inclusion of the whole country. Thusly, the degree of this examination was reduced to Lagos city whereby far most of Nigeria’s valuation practice is created. The city in this way has the most elevated grouping of both providers and end-users for valuation administrations. Lagos city practice could along these lines be seen as reasonably illustrative of Nigerian practice.

The information for the examination is to a great extent got from private practice firms of Estate Surveying and valuati0n in Lagos that heads practice or valuation unit/office since they are in the dominant part and really the individuals prone to be adjusted with current patterns, practices and measures along these lines would give an increasingly sensible information to study.

1.7 Significance 0f the Study

Immense investigation of study is relevant to valuation and best practices as it attempt to investigate the level of standards presently attained by Nigerian estate Valuers in their valuations preparation with ultimate goal of ascertaining the extent to which Nigerian valuation practice is adhering valuation standards and property value certification and attempt to establish a mechanism for improving level of compliance to valuation standards and property value certification in Nigeria.

Along these lines, we can raise the degree of consistency and polished methodology, further reinforcing general society’s trust in valuer activities. Finally, this investigation will be to a great extent helpful to specialists, understudies and educators of land and valuation instruction, valuation specialists and experts, administrative specialists and standard setters and every single other gathering in the valuation world.

1.8 Limitation to Study

Over the span of the study on the under-recorded limitations were experienced. This requirement includes:

1. Obliged material, human with money related assets transfer for researcher, this constrained restrictions on study inclusion.

2. Specialized portion of idea in the inquiries that was put across over to respondents required the analyst turning in utilization of individual meetings for specific respondents thusly adversely influencing the hour of the researcher.

3. The investigation of a few picked town and urban areas cannot be absolutely common of all town and urban areas in a nation as huge as Nigeria. Regardless, since the greater part of the Nigerian valuers total accumulate within investigation region, examination revelations were acknowledged to be material to the vast majority of valuers in the nation.

These requirements, regardless, would not by and large impact the after-effects of the study since essential precautionary measures were set up to counsel experienced experts who had drilled over the circles of Nigeria. Thus, the disclosures, recognitions and suggestions that oozed from the study could be attempted over the significant urban communities inside the nation and discovered important.

1.9 Description of the Study Area

The Study area is Lagos state, Nigeria. Lagos State being one of Nigeria’s 36 states represents 37% area mass of Lagos State however has about 85% populace with a normal populace thickness of 20,000 people for every kilometer square. The city’s current populace evaluated for 17 million and anticipated turning into the biggest third city on the planet continuously 2015 (Babawale, 2011).

Lagos state represented 11.7 percent which is N 1, 700.97 billion of national GDP next to the oil-rich city of Port-Harcourt in Rivers state. The state directions 65 percent of Nigeria’s business exercises, 60 percent of national modern speculation and outside exchange, 40 percent of assembling esteem included, 48 percent of building and development exercises, and 55 percent of discount and retail exchange (Lagos Indicator, 2009) retrieved from (Babawale, 2012).

Lagos is viewed as the most suitable region for this study for various reasons. In the first place, notwithstanding Lagos being the seat for Federal Government that has now moved to Abuja. City of Lagos remains the country’s business operational hub, mechanical with property venture exercises. Lagos city with most dynamic property showcase most elevated normal property estimation and load of speculations (Babawale and Koleoso, 2006).

Besides, accessible information with administrative bodies, Nigerian Institution 0f Estate Survey0rs and Valuers; and the Estate Survey0rs with the Valuers Registration B0ard of Nigeria, indicated that the quantity of enrolled firms of Estate Survey0rs and Valuers in Nigeria from January 2017 has 840, with 354 (42 percent) having either their administrative office if nothing else branch office inside Lagos city (NIESV Directory, 2017).

The city along these lines has the most raised gathering of both providers with end-customers of valuati0n administrations. Lagos city practice could thusly be seen as reasonably illustrative of Nigerian practice.

1.9.1 Geographic Description

Lagos is restricted onto Eastern and Northern of Ogun State in West, it offers outskirts with the Benin Republic, and its South opens into the Atlantic Ocean. With an all-out region of 3,577 square kilometres, Lagos metropolis is the littlest in Nigeria. In any case, unexpectedly, it is the most crowded state and it houses the biggest city in Africa. Tidal ponds and brooks take up an incredible 22% of the state’s complete territory (Lagos link, 2017 Lagos State being Nigeria littlest state yet, the most noteworthy urban populace, which is 27.4 % of the national gauge [UN-Habitat]. As per the 2006 National Census, Lagos State has a populace of 9,013,534 in connection to the National check of 140,003,542. In any case, in perspective on the UN-Habitat and universal advancement associations’ assessments, Lagos State is said to have about 24.6 million tenants in 2015. Of this people, Metropolitan Lagos speaks to over 85% on a domain that is 37% of the land area of the State, and the manner in which that Lagos masses is developing on various occasions snappier than that of New York and Los Angeles, and more than the quantity of occupants in 32 African nations joined, the State masses is required to hit the 35 million engraving in 2020.

1.9.2 Economic Base of Study Area

Lagos State is a noteworthy financial focus of Nigeria. On financial mirror, city of Lagos developed being a little cultivating angling home turning into a significant focal point of trade, fund and oceanic in Nigeria, lodging the central command of a few banks, ventures and business undertakings As indicated by the NIESV Directory (2017), majority of firms of estate surveying and valuation total in genuine commercial region within Lagos, for instance, Lagos Island, Ikeja, Lagos Mainland, Apapa with Victoria Island being area longing for an amazingly powerful property showcase.

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