By Nkiruka Nnorom

In view of the weak economic growth, shaky financial markets, and less accommodative monetary policies, investors have been urged to diversify their portfolio across asset classes that perform differently in various economic environment.

President Muhammadu Buhari and Vice President Yemi Osinbajo at the opening of a 2-day National Economic Council Retreat at the Statehouse Conference Centre on 21st March 2016.

Mr. Oyelade Eigbe, Head, Investments of Vetiva Fund Managers Limited, stated this in a report titled ‘The Stagflation Puzzle – Investment Direction’, saying that proper asset diversification helps in stabilising portfolio performance over time.

He posited that industrial and agriculture sectors stand out as preferred investment options and called on investors to allocate more resources to both sectors as they offer positive returns despite the economic challenges.

He added that the industrial and agriculture sectors could be beneficiaries of the present administration’s policy thrust.

“Over the last quarter, we witnessed inflation rise (Feb’16: 11.4 per cent vs Jan’16: 9.6 per cent), increased unemployment rate (Q4’15: 10.4 per cent vs Q3’15: 9.9 per cent) and reduced economic growth (2015 real GDP growth of 2.79 per cent, the lowest rate recorded in the rebased series)

At the second Monetary Policy Committee (MPC) meeting of 2016, it was noted that the CBN was struggling with “Stagflation”, which is an economic situation characterized by slow economic growth rate, high inflation and high unemployment. At the end of the meeting, the committee decided to tighten monetary policy.

“The MPC raised the Monetary Policy Rate (MPR) by 100bps to 12 per cent; raised the Cash Reserve Requirement (CRR) of banks from 20 per cent to 22.5 per cent; retained Liquidity Ratio at 30 per cent; and adjusted the asymmetric corridor from MPR+2 per cent and -7 per cent to MPR+2 per cent and -5 per cent (i.e. CBN will lend to banks at 14% and accept deposits at 7%).

“Whilst the appropriateness of the decisions may come under contention, the major concern on the investment front is how to appropriately allocate your assets in such a period,” he said.

Giving the breakdown of sectoral performance of various assets classes, Eigbe said that 2015 earning season showed mixed results, but reflected a decline in earnings generally.

He explained that the banks quarter four numbers were weak, though better than expected; Fast Moving Consumer Goods (FMCGs) also showed weaker numbers though consumer staples showed slight resilience.