Title: Valuing companies in emerging markets: The case of Nigeria
Author: Jaunty Edobor Aidamenbor and Chika Mgbemena
Supervisor: Anders Hederstierna
Department: School of Management, Blekinge Institute of Technology
Course: Master’s thesis in business administration, FE 2413, 15 credits (ECTS).
Background and Problem Discussion: Nigeria as an emerging market offers a
wealth of opportunity to investors. However, very little is known about how
real managers and analysts appraise the economic value of acquisitions and
investment projects in Nigeria. Given the high risks of the Nigerian market and
increased interests of investors in emerging markets, it is of great importance
to research how practitioners carry out valuation in Nigeria.
Purpose: This research attempts to investigate the valuation methods employed
by finance managers, investors and financial advisors in Nigeria in comparison
with best practices recommended in literature.
Method: Quantitative empirical method using a questionnaire-based survey of
financial practitioners with a total of 30 respondents (out of 200 contacted)
from corporations, financial advisor/analyst firms, banks & insurance firms and
some individual investors.
Theory: The theory section in the literature review looks at different methods
and techniques of valuation and the adjustments used to apply them to emerging
markets. The common methods of valuation and a theoretical understanding of how
they apply to emerging markets are summarised.
Analysis: Quantitative analysis of the survey data to show the percentage of
practitioners using a particular method of valuation and the areas of highest
uncertainty has been carried out.
Conclusion: Results show that Discounted Cashflow (DCF) is the most popular
valuation method with practitioners in Nigeria. 100% of practitioners in
corporations, banks and insurance firms and 80% of those in financial advisor
firms use DCF-based valuation model. Other valuation models are less in use and
the general practice in Nigeria compares well with those in Argentina and the
US with little vari...
