A real estate company, Brooks Africa, has said that investment in real estate would help Nigerians hedge against the country’s rising inflation.
According to the Chief Executive Officer, the Brooks Africa, David Onoja, regardless of the state of the economy, the fact that as inflation increases, which impacts the hike in property values and rental rates surge, the increase serves as an excellent inflation hedge.
He said, “Inflation is a normal part of an economy, inflation hedging can be used to counteract the expected decline in a currency’s value and safeguard the loss of purchasing power. Hedging against inflation can also help preserve the value of an investment. When inflation is taken into account, even though some investments can appear to offer a respectable return, they may really result in a loss upon sale.
“One option to invest in real estate is to acquire it, but it is considerably easier and more liquid to buy shares of a public real estate investment trust.”
According to Onoja, stock investors should consider alternative investments to hedge investment, as it is essential to have a diversified portfolio.
He advised, “Every investor must consider the danger of inflation as money tends to depreciate in value over time due to the increase. It is the reason why, despite the fact that loaves of bread today cost a couple of nairas, you might have heard your grandparents mention buying a loaf for a dime. There are numerous options for investors to protect themselves from inflation, including assets made particularly for this purpose.
“There are a few ways to try to hedge against inflation. One option is to purchase assets whose value tends to be tied to inflation. If inflation rises, their values will rise in tandem.”
The Brooks Africa boss noted that although investors in Nigeria tend to favour stocks and bonds, the practice can be expensive in the long run, particularly during periods of inflation, adding that increasing global exposure can be a successful method of protection against inflation.
“A few of the world’s largest economies do not rise and fall in lockstep with the Nigerian stock market indices. Including companies from other comparable nations can help you protect your portfolio against fluctuations in the home economy.”
In the same vein, the Chief Executive Officer of Riel Homes, Dr Kolade Adepoju, said real estate is the best way to hedge against inflation.
He added, “If you have a landed property, you do not need to do anything for that landed property to increase in value, putting that money in your bank is dwindling the value of the legal tender, but once invested, it births a passive income.”
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