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Inflation Hedging Potentials of Real Estate and Property in a Mixed Asset Portfolio of Nigerian Pension Fund

Author/s: Sadiq Tukur, Abass Iyanda Sule, Olurotimi Adebowale Kemiki, Unekwu Jonathan Adama, Muhammad Najib Razali

Date Published: 17/12/2025

Published in: Volume 30 - 2025 Issue 3 (pages 189 - 207)

Abstract

This study investigates the inflation hedging capabilities of real estate as an asset class within the Nigerian pension fund portfolio. It evaluates both short-run and long-run hedging performance against actual, expected, and unexpected inflation. The research employs monthly time series data from 2008 to 2024 (204 observations) sourced from the National Pension Commission (PenCom), Central Bank of Nigeria (CBN), and National Bureau of Statistics (NBS). Ordinary Least Squares (OLS) regression was used to assess short-term hedging effectiveness, while Johansen cointegration analysis examines long-run equilibrium relationships between real estate returns and inflation components. The results show that real estate provides a complete hedge against actual and expected inflation over the full study period. During the economic crisis period (2016–2024), it continued to offer a complete hedge for actual inflation and a partial hedge for expected and unexpected inflation. In contrast, during the pre-crisis period (2008–2015), real estate exhibited a perverse or weak hedge, particularly for unexpected inflation. These findings offer valuable guidance for the National Pension Commission and pension fund administrators, emphasizing the importance of allocating assets toward real estate during periods of high inflation. Investment managers can use this evidence to enhance long-term capital preservation strategies. This study provides the first comprehensive empirical analysis of the inflation-hedging role of real estate within the Nigerian pension fund context. It fills a critical gap in the literature by examining inflation in its decomposed form and linking it to economic cycle phases, offering nuanced insights for policymakers and institutional investors.

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Keywords

Inflation Hedging Potentials - Mixed Asset Portfolio - Nigeria - Pension Fund - Real Estate and Property

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