By Gbenga Agbana

Tuesday, 11 Jan 2011

Increase in liquidity in the economy through the sharing of $1bn excess crude proceeds by the three tires of government and the purchase of banks‘ toxic asset by the Asset Management Corporation of Nigeria, may help to sustain the bullish trend in the stock market, experts have said.

The stock market had reopened the year on a positive note last week, as the Nigerian Stock Exchange‘s All-Share Index rose by 5.65 per cent, to close at 26,169.86 points, compared to a marginal increase of 0.33 per cent in the last trading week in 2010.

Market capitalisation also rose by 5.65 per cent, from N7.91tn to N8.36tn.

According to the review of the financial markets and the outlook released by researchers at Sterling Capital Markets Limited, the bullish run will continue as increased liquidity is expected to sustain investor confidence in the market.

The researchers said, ”We expect the current bullish trend to continue, inspite of profit taking, particularly as increased liquidity further boost market performance. Buy opportunity continue to exist for stocks with good fundamentals for long-term.”

The liquidity in the system last week, according to the report, resulted in depreciation in the Nigeria Inter-bank Offer Rate.

The report said, ”Rates dropped at the inter-bank market last week, reflecting the impact of increased liquidity in the system. This followed the sharing of $1bn excess crude proceeds by the three tiers of government last week. Consequently, the all maturity average NIBOR decreased by 197 basis points to 10.31 per cent from 12.28 per cent. 90 days money declined from 13.7 per cent to 12.18 per cent, while the 30 days money was 10.03 per cent as against 11.97 per cent the previous week

The naira depreciated by 33 kobo or 0.22 per cent at the official market to close at N149.17 to a dollar, but it remained stable at the parallel market at N156 to a dollar.

Source: Punch