By Babajide Komolafe

Coronation Merchant Bank has released a report on how to overcome the challenge of high inflation through investment in equities of selected companies listed on the NGX Exchange.

This report written by Guy Czartoryski and Adebayo Adebanjo of Coronation Research, the report averred that the investment in equities of 10 listed first produced average annual return of 20.5% from 2016 till date, which is far above the 14.26 average annual inflation rate during the same period.

Speaking at a press conference to unveil the report, Aigbovbioise Aig-Imoukhuede, Managing Director/Chief Executive, Coronation Asset Management, said,  ”Nigerian listed equities, if properly selected, can deliver an adequate return to investors over the long term” .

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Also speaking, Adebayo Adebanjo in his presentation of the report, said: “Nigerian investors face a third successive year of T-bill rates well below the rate of inflation, Coronation Research asks: “Which Nigerian investments beat inflation over the long term?”  

“The surprising answer to this question is: “Equities”.  Coronation Research has studied equity returns during the period from 1 January 2016 until now.

“While the performance of the NGX All-Share Index was not strong, the performance of a selection of the most profitable NGX-listed companies has provided superior and inflation-beating returns.  

“So, the return of the NGX All-Share Index from 1 January 2016 to 30 September 2021 was 40.50% or a compound annual growth rate (CAGR) of 6.15%.  With gross dividends reinvested, that rose to a CAGR of 12.44%.  

“But neither return would have beaten inflation over the same period, which averaged 14.26% per annum.  

“However, a basket of 10 NGX-listed companies, each with a long-term and sustainable Return on Equity (RoE) of 20.5% or more, would have delivered an investment return with a CAGR of 16.36% from 1 January 2016 to 30 September 2021. With dividends reinvested, this would have risen to a compound annual growth rate of 24.71%.”