Coronation Asset Management has advised investors to tap into the equities market to get a return that supersedes inflation figures.
Coronation Research in its new report, ‘Equities for a superior return,’ noted that the Nigerian investment climate is still strong and attractive for both long- and short-term investors.
Managing Director/CEO, Coronation Asset Management, Mr. Aigbovbioise Aig-Imoukhuede speaking at a virtual press briefing over the weekend said: “This report written by Guy Czartoryski and Adebayo Adebanjo challenges the widely-held opinions about Nigerian investments, in particular views about the equity market. Nigerian listed equities, if properly selected, can deliver an adequate return to investors over the long term.”
Furthermore, he added: “The NGX All-Share Index from 1 January 2016 to 30 September 2021 was 40.50per centor a compound annual growth rate (CAGR) of 6.15per cent. With gross dividends reinvested, that rose to a CAGR of 12.44 per cent. But neither return would have beaten inflation over the same period, which averaged 14.26 per cent per annum.
“However, a basket of 10 NGX-listed companies, each with a long-term and sustainable Return on Equity (RoE) of 20.5 per cent or more, would have delivered an investment return with a CAGR of 16.36 per cent from 1 January 2016 to 30 September 2021. With dividends reinvested, this would have risen to a compound annual growth rate of 24.71 per cent”
Furthermore he said: “ The Central Bank of Nigeria and other monetary authorities such as the debt management office (DMO) are in no hurry to push interest rates back up. I think the issue with interest rate way below the rate of inflation would stay throughout next year.
“Well of course we expect inflation to come down next year and it would trend down around 12 per cent by the middle of next year. However, we don’t think market interest rates like T-bills rates are going to go up very much. So this situation where you have T-bills rates lower than inflation is a new reality and it would stay like for at least a year. So, select equities would offer superior returns.”
