“Frankly my view has always been that while we complain about the militancy and the oil theft, we haven’t yet looked at the huge leakages that happen under the guise of official transactions, the oil lifting contracts, the swap deals, the rate of remittances of oil revenues,” Nigeria’s central bank governor Sanusi Lamido Sanusi told CNBC Africa.
“I think if we close those fiscal leakages and improve government revenue, we’ll have more money coming into the federation account, and more dollars. Therefore, the outlook will be better,”
According to the United States (US) Energy Information Administration, the US has imported between nine to 11 per cent of its crude oil from Nigeria.
Sanusi feels that despite the decision by the US Federal Open Market Committee (FOMC) to suspend its bond buying tapering plan, there will be no inflow that could possibly cause instability for Nigeria.
“I’m only more optimistic to the extent that the external conditions are better. We do have certain clarity on the tapering off and a better understanding by the markets of what the Federal Reserve actually means. I think initially when chairman Bernanke talked about the tapering off, people thought it was tightening,” he explained.
“They now understand that it is just about reducing the rate at which the Fed expands its balance sheet. We’re not likely to see, even when the tapering off happens, the same kind of kneejerk reaction we saw when the first announcement came up.”
The FOMC recently voted to continue to buy bonds at a monthly pace of 85 billion dollars, and Sanusi feels that the tapering suspension by the US will have a muted impact on the equities market.
“If you look generally at what happened, you’ll see that there has been an impact on both emerging and frontier markets. Clearly the impact on emerging markets, when you look at the currency markets and what’s more severe, both in terms of the initial capital flow reversals and the new inflows after the announcement, will be a muted impact,” he indicated.
“We didn’t have the kind of massive run on portfolio flows that you saw in Brazil or India. We will see some money come back. We’re not going to see a massive inflow but the news is good for us because easy money means the carry trade continues and that’s good for the price of oil, the price of equities and the foreign exchange market.”