Investment experts have recommended ways in which investors can earn good returns despite deep-rooted inflation in Nigeria and around the globe.
The experts shared their views during the Nairametrics investment webinar tagged, “How to invest wisely in the world’s highest inflation.”
The webinar which was directed at educating and enlightening the general public on investments and how to erode inflation pressures, also saw experts shed light on questions about why countries are currently witnessing high inflation and what best to invest in during the era of increasing prices.
What experts are saying
Describing inflation as too much money in circulation chasing few goods, Kenneth Brai, Head Asset Management at Comercio Partners Asset Management Limited said inflation is a result of quantitative easing occasioned by central banks around the world.
Pointing out that investment plans have high and low performance, depending on the investment bouquet during inflation period, Omotola Abimbola, Senior Portfolio Manager at Chapel Hill Denham stated that investors tend to look for safety cohort in times of inflation.
He highlighted asset classes capable of withstanding the heavy storm of inflation and those that do not. He said, “Risk assets like equities don’t do well during inflation period. Bonds also don’t do well because the bond prices and inflation prices have inverse relation.”
On the other hand, he noted that commodities like energy and agriculture do well adding that short term bonds tend to yield more than long term bonds during inflation. He however advised that investors compartmentalize their investment and also have a portfolio that caters for short term goals.
In the view of Kalu Aja, personal finance expert and finance commentator, the US inflation is driven by a surge in energy prices caused by the Russian-Ukraine war. According to him, what needs to be done in this regard is to solve the energy crisis. “You can’t fix energy inflation by fixing rate, but increasing energy supply,” he said.
Charting a way forward on how to hedge against inflation, Aja recommended buying in bulk, diversification of portfolio and flight from holding naira.
Temisan Agbajoh, a DeFi analyst opined that money from crypto doesn’t really affect global inflation market scale as the market cap of the crypto market still stands at a significantly low rate compared to the other portfolios that have been on for a long while.
Speaking on the bearish performance of the crypto space in recent times, he said, “I do not believe that the era of bull market is over. There would always be another bull market.”
What you should know
- Nigeria’s inflation rose to 16.82% in April 2022, following a similar uptick recorded in the previous month as a result of the increase in energy and food prices.
- Food inflation rose to 18.37% in the review month, an increase compared to the 17.2% recorded in the preceding month. This rise in the food index was caused by increases in the prices of bread and cereals, food products, potatoes, yam, and other tubers, wine, fish, meat, and oils.
- On Tuesday 24th May 2022, Nigeria’s Central Bank suddenly hiked its benchmark interest rate for the first time in over two years to 13% from 11.5% (a 150bps hike).
- Governor Godwin Emefiele announced that the monetary policy committee’s decision was intended to slow galloping inflation and save the persistent Naira depreciation.