By Babajide Komolafe
Investors last week demanded higher returns on government securities in anticipation of further rise in inflation rate.
Results of trading in government securities last week showed that some investors demanded for 15 per cent returns on the three-year and five-year treasury bills offered by the Central Bank of Nigeria (CBN).

The CBN, however, rejected their demand, offering between 12 and 13 per cent returns.

The apex bank offered N35 billion worth of three years bills and N35 billion worth of five year bills. Both offers  were about 90 per cent oversubscribed, with public subscription for the former at N65 billion and for the latter N63.30 billion.

The interest rate demanded by investors for the three-year bills ranged from 10 to 15 per cent while for the five-year bills ranged from 11.75 and 15 per cent.

The stop rate, or return offered by the apex bank was 12.149 per cent for the three-years bills and 13.1989 per cent for the five-year bills.

The return offered by the apex bank is however higher than that of the previous auction. The stop rates for the previous auction were 10.5 per cent for three-year bills and 12 per cent for five-year bills.

The demand for higher returns by investors and the rise in stop rates reflect expectations of further rise in inflation and interest rates. Last week, the National Bureau of Statistics released 12.8 inflation figures for March, which represents 170 basis points increase when compared with the 11.1 per cent inflation figures for February. Also, it would be recalled that the apex bank raised the Monetary Policy Rate to 7.5 per cent last month from 6.5 per cent in anticipation of increased inflation.

Meanwhile, interbank interest rates rose marginally as scarcity of funds intensified throughout the week.Interest rate on Call lending rose by 71 basis points to 10.54 per cent, 7-Days lending rose by 24 basis points to 11.16 per cent while 30-Days lending rose by 20 basis points to 12.33 per cent.

On the foreign exchange scene, the Naira on Wednesday, recorded its first appreciation at the official foreign exchange market in seven weeks gaining 21 kobo against the dollar.

The appreciation was occasioned by increased supply by the Central Bank of Nigeria  and decline in demand at the foreign exchange at the bi-weekly foreign exchange auction conducted on Wednesday.

The CBN offered $400 million, which is $100 million higher than what was offered in each of the three previous auctions. Demand however fell by 25 per cent to $324 million from $431 million on Monday. Consequently, the naira gained 21 kobo as the official exchange rate dropped to N152.75 per dollar from N152.96 per dollar on Monday.

The naira has been depreciating against the dollar since Monday, March 7th when it appreciated by three kobo as the official exchange rate dropped to N150.68 from N150.71 per dollar. Between March 7th and April 18th,  the naira has depreciated by 228 kobo, with the official rate rising to N152.96 before the appreciation on Wednesday.