The Managing Director/Chief Executive Officer of Coronation Asset Management, Aigbovbioise AigImoukhuede, has said Nigeria-listed equities, if properly selected, can deliver an adequate return to investors over the long term.
He made the disclosure at a virtual media engagement by Coronation Research at the weekend ahead of the release of a new report, ‘Equities for a Superior Return.’
This report, which was written by Guy Czartoryski and Adebayo Adebanjo, challenges the widely-held opinions about Nigerian investments, in particular views about the equity market.
As 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 January 1, 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.
According to Czartoryski, “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%.”