Afrinvest Asset Management Senior Fund Analyst Victoria Njimanze spoke to the Global Business Report about the right investment strategy to manage rising inflation

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In recent years, Nigeria has been facing a serious challenge of inflation which has caused a significant decrease in the purchasing power of its citizens. Inflation, being the sustained increase in the general price level of goods and services, poses a great threat to the economy and the financial stability of individuals. To combat this issue, Nigerians need to craft an investment strategy that can help them manage inflation effectively.

One important aspect of managing inflation is to invest in assets that have the potential to provide a hedge against inflation. This means investing in assets that have a positive correlation with inflation, such as real estate, commodities, and stocks. These assets tend to increase in value as inflation rises, thus preserving the purchasing power of your investment.

Real estate is considered a good hedge against inflation as property values tend to increase with inflation. Investing in real estate can provide a steady stream of rental income and potential capital appreciation over time. Additionally, commodities such as gold, silver, and oil also tend to increase in value during times of high inflation, making them a good investment option.

Stocks are another good investment option that can provide a hedge against inflation. Companies that are able to pass on increased costs to consumers through higher prices or have strong pricing power tend to perform well during periods of inflation. Investing in dividend-paying stocks can also provide a steady stream of income that can help offset the impact of inflation on your portfolio.

In order to craft an effective investment strategy to manage inflation, it is important to diversify your investment portfolio. By spreading your investments across different asset classes, you can reduce the risk of loss and increase the potential for higher returns. Diversification can also help you capture the benefits of different assets that may perform well in different economic environments.

Furthermore, it is important to stay informed and educated about the economy and financial markets. Keeping abreast of economic indicators such as the inflation rate, GDP growth, and interest rates can help you make informed investment decisions. Consulting with a financial advisor can also provide valuable insights and guidance on crafting an investment strategy that aligns with your financial goals and risk tolerance.

In conclusion, the issue of inflation poses a great challenge to the Nigerian economy and the financial stability of individuals. By crafting an investment strategy that includes assets that can provide a hedge against inflation, diversifying your investment portfolio, and staying informed about economic indicators, Nigerians can effectively manage inflation and preserve the purchasing power of their investments. With careful planning and sound financial decisions, Nigerians can navigate through periods of inflation and achieve long-term financial success.