Security forces surrounded the cemetery in the east of the coastal city and brief exchanges of gunfire could be heard around midday.

A soldier rushing to the scene told an AFP correspondent the gunmen had been located but were resisting capture.

Two neighbouring schools catering to Nigerian and Spanish nationals were evacuated.

The attackers on Tuesday reached the presidential palace, which was shown on state television with bullet marks, smashed windows and doors, but President Teodoro Obiang Nguema was absent during the raid.

The capital remained tense a day after the government said its armed forces had repelled a seaborne attack in the early hours which it blamed on Nigerian militants.

It said many of the attackers had been killed, some were arrested and some escaped into the capital. No casualty toll from any of the clashes had been released by late Wednesday.

Some banks and shops shut down Wednesday at the sound of fresh gunfire, but public administration offices were operating normally.

The government said Tuesday the raid had directly targeted the presidential palace in Malabo, which is situated on the island of Bioko off the west coast of Africa, about 200 kilometres (125 miles) from the Nigerian oil city of Port Harcourt.

State television showed one body by the presidential palace, wearing a black headband and carrying a machete and alleged that this "terrorist" and the others had used bazookas and homemade bombs.

Equatorial Guinea, the continent's third-biggest oil exporter, has a history of coups, the last successful one being when President Obiang Nguema toppled and executed his uncle in 1979, establishing an iron-fisted regime.

MEND (Movement for the Emancipation of the Niger Delta), Nigeria's main militant group, which the government accused of the attack, denied involvement and regional experts were sceptical of the claim that it might have tried to oust Obiang Nguema.

"If MEND wanted to attack Bioko island, they would certainly have used more boats" Swiss academic specialist on Equatorial Guinea Max Liniger-Goumaz told France's RFI radio on Wednesday.

Liniger-Goumaz added that for a force like the one blamed for Tuesday's raid to go up against Obiang's strong presidential guard would have been highly unlikely, even "crazy," but he thought bandits "mainly out for money" might have risked it.

A local business leader also refused to blame MEND, which regularly attacks oil facilities within southern Nigeria, saying it is battling for a greater share in the region's oil resources for local people.

"This just shows that insecurity is growing and that's not good for business," said the local entrepreneur, who operates in the construction industry.

Sources close to militant groups in the Niger Delta say some members of MEND were recruited and trained to take part in a 2004 coup attempt in Equatorial Guinea but were intercepted before they arrived on the island.

British mercenary Simon Mann is currently serving a 34 year jail sentence for leading the aborted coup.

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