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The Nigerian Stock
Exchange said on Monday that share purchases by foreign investors rose
88 percent last year to 381 billion naira and that wider trading hours
meant liquidity was continuing to improve.

Africa’s third
biggest stock exchange said falling incomes attributed to rising
unemployment, weaker purchasing power due to inflation, and local
investor apathy had caused a decline in market participation by
Nigerians.

“Some of our
erstwhile foreign investors are returning, while new investors sought
opportunities considering the key attributes of higher returns,” the
stock exchange said at an annual briefing to journalists in Lagos.

The bourse said
wider trading hours introduced last month had led to a 15.6 percent
increase in traded volumes meaning liquidity was improving.

It expected trading
in exchange-traded funds (ETF) to start in 2011. The bourse said in
October it was in talks with South Africa’s Absa Capital about listing
such a fund.

Nigeria’s domestic
debt grew at the fastest pace in 11 years during 2010, with total
public debt of $32.5 billion as at September 2010, according to the
stock exchange.

It said credit to government grew over 50 percent last year while private sector credit grew only 3 percent.

The bourse expects
an increase in money supply this year to provide stability to the stock
market and inject liquidity into the banking system, reviving lending
to the economy.

“Inflationary risk
will remain a threat in the months ahead due to the implementation of
the 64 percent increased minimum wage in the public service, rising
government borrowing and the expected increased political spending up
to the 2011 general elections,” it said in an annual review.

The stock exchange
said it expected all eligible non-performing loans in the banking
sector to have been bought by the Asset Management Corporation of
Nigeria (AMCON), the country’s new “bad bank”, by March 31.

AMCON was established last year to soak up bad loans and get banks lending against after a $4 billion bailout in 2009.

The stock exchange
said it expected a flurry of new issues this year as some bailed out
lenders recapitalise and some manufacturing firms raise funds to beef
up their capital bases.

It also expects to
begin preparations for demutualisation in the first quarter, a process
which will turn the exchange into a listed company, making it more
competitive and giving it a larger incentive to bring in profitable new
products.