Inflation: Comercio Partners Urges Investors to Hedge, Diversify Assets

Comercio Partners, an investment banking firm has called on investors to diversify their portfolios so as to protect against the risks of rising inflation.

Data from the National Bureau of Statistics, NBS showed that the headline inflation rate rose for the 10th consecutive month to 27.33 per cent in October from 26.72 per cent in September.

In a report analysing the October inflation report and implications, the Co-Founder,  Comercio Partners,  Tosin Osunkoya noted, “Although there is a slowdown in the pace of growth compared to September and August, the double-digit inflation persists, posing significant challenges for Nigeria’s population across various socio-economic strata.”

He added that, “navigating the current economic landscape in Nigeria requires a cautious approach from investors, considering the multifaceted implications of inflation on various asset classes. “Additionally, policymakers need to maintain a vigilant stance, ensuring that monetary policies are adaptive to the evolving economic conditions.”

Consequently, Osunkoya recommended to investors’  interest rate sensitivity, diversification and hedging as measures to protect their portfolio from inflation risks.

He said: “Investors should consider diversifying their portfolios to mitigate risks associated with inflation. Assets like real estate, commodities, and international investments could provide a hedge against the impact of inflation on domestic assets.

“Given the expected continuation of the high-interest rate environment, investors should be mindful of the interest rate sensitivity of their investments. Sectors such as real estate and bonds may experience challenges, while sectors like utilities and certain commodities may fare better.”

Osunkoya further noted that the further rise in the inflation rate implies continued monetary tightening, liquidity mop up by the CBN, as well as a need for  clear and transparent communication from the new CBN Governor.

He said: “The persistently high inflation rate suggests that the CBN is likely to maintain its stance of tight monetary policy. This involves keeping interest rates high to curb inflationary pressures.

 “The continued effort to mop up excess liquidity in the market is expected to be a key element of the monetary policy. This is aimed at controlling inflation by reducing the money supply.

“The new CBN governor’s communication strategy will be crucial. Clear and transparent communication regarding monetary policy intentions and strategies can help manage expectations in the financial markets and among the public.”