The few years leading up to mid-2008 were giddy times for Nigeria’s capital markets. More and more investors piled into equities as returns kept rising. Banks, unconstrained by lax regulation, were only too happy to support them by providing as many margin loans as they wished. The frenzy came to an end when oil prices plummeted and foreign investors fled the country in droves. The main index on the Nigerian Stock Exchange (NSE), which had a market capitalisation of $110bn in March 2008, lost 70% of its value in the following 12 months.
A crisis of the banks, whose stocks made up most of the NSE, followed. Bad loans soared and the central bank had to inject $4bn into 10 commercial lenders that failed stress-tests in the second half of 2009.
