Comercio Partners, an investment banking firm, has called on investors to diversify their portfolios for protection against the risks of 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, 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.

“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.”

Osunkoya recommended investors’ interest rate sensitivity, diversification and hedging as measures to protect portfolios against inflation risks.

“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,” he said.

Osunkoya noted that the further rise in the inflation rate implies continued monetary tightening by the Central Bank of Nigeria (CBN) as well as a need for clear and transparent communication by the apex bank.

“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,” he said.