Valuation Challenges in a Volatile Economy: The Nigerian Experience

By SAMSON CHURCHILL BABAJIDE, MNIVS, RSV

Valuation remains a critical foundation for property investment, financial decisions, and national economic planning. However, the Nigerian economy’s volatility has created unprecedented challenges for valuers in achieving accuracy, reliability, and professional credibility. This paper examines the major valuation challenges in Nigeria’s unstable economic environment and proposes practical approaches for maintaining professional integrity and relevance amid continuous change.

Introduction
The role of the estate surveyor and valuer in Nigeria is fundamental to the stability of the real estate market and the wider economy. Yet, valuers operate within an environment characterized by exchange rate fluctuations, inflationary pressures, inconsistent government policies, and unpredictable market behavior. The Nigerian economy’s exposure to oil dependency, foreign exchange scarcity, and policy uncertainty has made valuation practice increasingly complex.

Valuers are now faced with the dilemma of producing credible opinions of value in markets where comparable evidence is distorted by rapid price movements and speculative transactions. This paper discusses how economic volatility affects valuation accuracy, the professional challenges arising from it, and possible strategies for adapting to this reality.

Valuation Challenges in a Volatile Economy

1. Inflation and Currency Devaluation
   Persistent inflation and currency devaluation have a direct impact on the purchasing power of money and, consequently, on property values. In recent years, Nigeria has experienced double-digit inflation rates, with the naira depreciating sharply against major currencies. For valuers, this volatility makes it difficult to maintain a stable basis for comparison. The time lag between valuation inspection and report submission may result in significant value discrepancies.
2. Unreliable Market Data
   Accurate data is the backbone of any valuation. However, in a volatile economy, market data becomes unreliable due to constant fluctuations in property prices, construction costs, and rental values. Many transactions are undocumented, informal, or influenced by speculation. The absence of a robust and accessible property database further compounds this challenge, leading valuers to rely on limited or outdated comparables.
3. Policy Inconsistency and Regulatory Shifts
   Frequent changes in monetary, fiscal, and land policies—such as variations in interest rates, import tariffs, and land use regulations—create uncertainty. Valuers must continuously interpret the implications of government interventions, such as the Monetary Policy Rate adjustments, foreign exchange controls, and recent programs like the Mass Housing Scheme and MRIEF (Mortgage Refinancing and Interest Expansion Fund). While these initiatives aim to stabilize the sector, they also influence property demand, lending rates, and investment viability, all of which affect valuation outcomes.
4. Cost Estimation and Construction Volatility
   The erratic prices of building materials—driven by import dependency and inflation—make cost estimation unreliable. Valuers adopting the cost approach often find that prices quoted during the estimation process become obsolete within weeks. This has led to an increased emphasis on sensitivity analysis and market trend adjustments in valuation reports.
5. Client Pressure and Professional Ethics
   In periods of economic instability, clients may pressure valuers to produce figures that favor specific financial or investment positions. Maintaining professional ethics under such circumstances is a test of integrity. The valuer must balance client expectations with adherence to the Nigerian Institution of Estate Surveyors and Valuers’ (NIESV) Code of Conduct and the International Valuation Standards (IVS).

Professional Insight from Practice
As a practicing Estate Surveyor in Nigeria, I have observed that valuation assignments in volatile periods demand more diligence, transparency, and justification. For instance, when valuing investment properties during inflationary cycles, adjustments to capitalization rates must reflect both market risk and investor sentiment. Similarly, for mortgage valuations, it is prudent to adopt conservative estimates that anticipate further economic shocks.

Moreover, professional communication with clients has become essential—explaining valuation assumptions, sources of data, and the limitations imposed by market volatility. This promotes confidence and upholds the credibility of the profession.

Recommendations

1. Adoption of Dynamic Valuation Models: Valuers should integrate econometric tools and real-time market analytics to adjust for inflation, interest rates, and exchange rate changes.
2. Improved Data Management: NIESV and the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) should collaborate to develop a centralized property data repository accessible to practitioners.
3. Continuous Professional Development: Training on emerging valuation methods, risk analysis, and technology-driven tools (like AVMs and GIS) is crucial.
4. Policy Engagement: The profession must engage policymakers to ensure that economic and real estate reforms reflect the realities of the market.
5. Ethical Reinforcement: Upholding professional ethics should remain non-negotiable. A transparent and well-documented valuation report preserves the profession’s integrity.

Conclusion
Economic volatility in Nigeria presents both challenges and opportunities for the estate surveyor and valuer. While external forces such as inflation, policy shifts, and currency instability complicate valuation practice, they also underscore the valuer’s importance in guiding sound investment and policy decisions. By embracing innovation, maintaining ethical standards, and strengthening data reliability, Nigerian valuers can continue to deliver credible opinions of value in the face of uncertainty.