Around the world today, markets have become volatile due to the Russia-Ukraine war, depleted food chain supply and the resurgent coronavirus in China. For importing countries, fiscal costs of food and energy subsidies have increased, wheat and oil are now 50% more expensive than they were a year ago.
According to a CNN Business report dated April 29, 2022, US personal consumption expenditure index increased by 6.6% for the first quarter, energy costs increased by 33.9%, and food prices by 9.2% over the same period.
According to the National Bureau of Statistics (NBS), in Nigeria, the consumer inflation rate recently increased to 15.92% in March from 15.70% in February, while food inflation rose to 17.20% from 17.1%.
In today’s market, investors need to readjust their portfolios to either take advantage or hedge against investment downside risk. Here are some safe landings when investing during a hyper inflation:
The Nigeria equity market has been doing well this year. The market recorded a positive performance in April 2022, growing at 5.69% MoM.
Investors should look beyond earnings and earnings projections; your investments should be on viable stocks such as; consumer goods, industrial goods, financial services, manufacturing, real estate, construction and ICT. Examples are Dangote Cement, GTCO, Nestle, Total Energy, MTNN, Conoil, UBA, Okomu Oil, etc.
2 Fixed Income
Another safe landing for investors to consider is turning to short-term or floating rate bonds. Generally, longer-term securities are more susceptible to interest rate changes because of greater duration and a greater probability of experiencing rate fluctuations than short-term bonds. Investors can decrease this volatility by moving into bonds with short-term maturity dates or purchasing bonds with floating coupon rates in line with the market rate.
3 Real Estate
Real estate in Nigeria like in many parts of the world is an ever-booming investment sector in the economy, which tends to rise and even outpace interest rates and helps keep pace with inflation. As inflation rises, so does property value. Investors can buy real estate or invest in Real Estate Investment Trusts (REITs). REITs are trusts that use the contributed capital of many investors to purchase and manage income property and/or mortgage loans. They are traded on NGX just like stocks.