INFLATION-HEDGING POTENTIAL OF NIGERIAN BREWERY STOCKS

Abstract

Inflation is an ill-wind that blows no one any good. It is an important variable in investment decision. In inflationary period, investors are usually jittery because not only that their invested capital and expected income are at risk of extinction, the possibility of maintaining the value of the investment to command the expected purchasing power is heavily threatened. To combat this monster called inflation and protect the purchasing power of investment income, the investor should properly examine his potential investment assets to make sure such can offer him the security of his capital and income in real terms. Against this background, this study sets to examine the inflation-hedging potentials of investment in equity stocks of quoted brewers in Nigeria between 2000 and 2011. The study applied real rate of return on equity and regression analysis to find the stocks that provide positive real return and offer inflation-hedging potentials respectively. The findings revealed that in terms of real return based on shareholders’ funds and total return to equity, all the firms were not susceptible to adverse effect of inflation but when based on dividend yield all the firms offered no significant hedge against inflation.