Impact of Inflation on Strategic Portfolio Asset Allocation in Nigeria

Abstract

Inflation remains one of the most significant macroeconomic threats to investment performance, particularly in emerging markets where policy responses and asset markets are often underdeveloped. This study investigates the impact of inflation on strategic portfolio asset allocation in Nigeria using monthly and quarterly data from 2003 to 2025. Drawing on the theoretical frameworks of the Fisher Effect and Modern Portfolio Theory, the research employs Vector Autoregression (VAR), Autoregressive Distributed Lag (ARDL), and GARCH models to capture the dynamic relationship between inflation and asset performance across different inflationary regimes. The findings reveal that inflation in Nigeria is not only persistent but also exhibits significant volatility clustering and prolonged high-inflation episodes. [cite_start]These characteristics erode the real value of fixed-income investments and necessitate the strategic inclusion of inflation-resilien... [cite: 8]

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