Inflation is every investor’s quiet enemy.
It eats away at the value of your savings and reduces what your money can buy over time.
In Nigeria today, inflation has eased to around 20.12%, down from the 34.8% peak in December 2024.
While that’s a relief, it’s still high enough to erode your wealth if your investments don’t keep pace.
That means one thing: any investment returning less than 20% per year gives you a negative real return. You might feel richer, but your money is losing value.
To stay ahead, investors must aim for returns that beat inflation while keeping risk in check. The key is not chasing the highest returns but building a balanced portfolio.
Understand the goal: Real returns
Earning a nominal 15% of your money may sound good, but if inflation is 20%, your real return is –5%.
Beating inflation means looking for investments that can deliver a return above 20%, with an acceptable level of risk.
In Nigeria’s current market, this is not easy, especially when many fixed-income instruments still offer yields below inflation.
For instance, the latest Nigerian Treasury Bills (NTBs) auctions closed with stop rates around 15–16%, while the October 2025 FGN Savings Bonds offer 14.062% (2-year) and 15.062% (3-year) returns.
These are safe and tax-free, but their real yields are still negative when compared to inflation.
So, while they remain good for capital preservation and predictable income, they can’t single-handedly protect your wealth from inflation’s bite.
That means investing in these risk-free assets alone cannot help you beat inflation. You’ll need to look at other asset classes that can generate higher returns. Stocks and alternative assets easily fill in that gap.
Watch the risks
Investing to beat inflation can be exciting, but risks are everywhere. Here’s what to watch:
- Systemic risk: Big shocks like changes in interest rates, FX swings, or inflation spikes. For example, an MPC rate cut in November could shift which assets perform best.
- Unsystematic risk: Company- or sector-specific problems, like bad management or operational hiccups.
- Credit risk: Bonds aren’t risk-free — issuers might miss interest or principal payments.
- Reinvestment risk: When bonds or dividends mature, the new rates may be lower.
- Liquidity risk: Some assets, like REITs or commodities, take time to sell at fair prices.
- Scams & overhyped promises: Avoid investments that guarantee unrealistically high returns.
Knowing these risks helps you grow wealth safely while still aiming to beat inflation.
Build a balanced portfolio
Not all investments are created equally. Some give returns below inflation, while others can outpace it—but higher returns often come with higher risk.
That’s why smart asset allocation is key to building a portfolio that grows your wealth safely.
Equities – 40% allocation
Allocate about 40% of your portfolio to equities to drive the portfolio return.
With a target return of 55% and a risk factor of 0.85, the expected risk-adjusted return is around 32%, contributing about 19% to the overall portfolio’s target return.
Government bonds & treasury bills – 20% allocation
This asset class won’t make you rich overnight, but it provides predictable income and keeps your money safe.
Allocate 20% of your portfolio to these instruments. With expected returns of 15% and a risk factor of 1 (zero risk), they contribute roughly 3% to your overall target return.
These investments are backed by the Federal Government, making them low risk, helping your portfolio stay balanced and protected against inflation.
Commercial Papers – 20% allocation
Commercial papers are short-term corporate debt instruments that companies use to fund operations. They offer higher returns than government bonds, but with slightly more risk.
Allocating about 20% of your portfolio to commercial papers can help stabilize returns. Since the interest income is paid upfront, you can reinvest it to potentially boost your overall portfolio return
Given an expected return of 22% and a risk factor of 0.9 (to account for market fluctuations), the risk-adjusted return comes to roughly 19.80%, contributing about 3.96% to your overall portfolio return.
Alternative assets – 20% Allocation
Alternative assets like gold, commodities REITs, and other non-traditional investments provide a hedge against inflation and currency swings. They can offer strong returns when traditional markets fluctuate.
Allocating about 20% of your portfolio to alternatives can diversify risk and boost overall returns.
Given an expected return of 50% and a risk factor of 0.9 (to account for price volatility), the risk-adjusted return comes to roughly 45%, contributing about 9% to your overall portfolio return.
These assets complement equities and fixed-income instruments, helping your portfolio stay resilient while chasing inflation-beating returns.
Picking the right assets for your portfolio
Not every stock or alternative asset will help you beat inflation. Being selective is key.
Equities
For this asset class, picking the right stock is key. While some have outperformed inflation, others have not.
- In 2024, just 64 stocks gave returns above the year-end inflation rate of 34.8%, while 34 ended in the red.
- In 2025, performance has improved: 99 stocks have outpaced the lower inflation rate of 20.12%, while 19 have recorded losses.
This shows that opportunities exist, but investors must be intentional in picking stocks:
- Earnings Growth: Look for companies that consistently grow profits faster than inflation. Banks like GTCO and Zenith Bank, or industrial leaders like Dangote Cement, are examples.
- Dividend Yield: Stocks with consistent dividends cushion against inflation. Aim for yields above 5–7% with a solid track record.
- Sector Strength: Some sectors, like consumer goods, have rebounded after FX gains and high interest costs weighed on performance in 2023–2024. Stocks like Northern Nigerian Flour Mills may offer upside, trading below their 52-week highs.
- Valuation and Liquidity: Avoid overhyped stocks at unrealistic prices. Stick to companies with good governance and strong market liquidity. Banking stocks are good here because of their strong liquidity
The key takeaway: focus on fundamentally strong, inflation-beating stocks rather than chasing hype.
Alternative assets
Alternative assets here include gold, currencies, crypto, exchange-traded funds, derivatives, and real estate through REITs.
- These investments help hedge against inflation and currency swings.
- In Nigeria, listed REITs such as SFS REIT (Skye Shelter Fund), Union Homes REIT, and UPDC REIT offer exposure to income-generating properties and pay regular dividends, providing more stable returns compared to equities or commodities.
- Global Trends: Track international demand and geopolitical developments. Gold, for example, surged over 50% year-to-date in 2025 as investors sought safe havens.
- Market Timing: Consider entry points; buying when prices dip can increase your potential return.
- Diversification: Spread your allocation across commodities and other alternatives to reduce the impact of volatility in any single asset.
By carefully selecting equities and alternatives, you maximize your chances of hitting your target portfolio return.
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