“If you look generally at what happened after the announcement of the postponement, you’ll see that there has been an impact on both emerging and frontier markets,” Nigeria’s Central Bank Governor, Sanusi Lamido told CNBC Africa.
The impact on emerging markets has been much more severe. In terms of the initial capital flow reversal and the new flows after the announcement the governor said, “There will be a muted impact; we didn’t have the kind of massive run on portfolios that we saw in Brazil or India.”
Lamido said that some money was expected to come back but not in a massive flow that will be a cause of instability to the local market.
“The news is good for us because easy money means the carry trade continues and that is good for the price of oil and it is also good for the price of equities and for the foreign exchange market.” he said.
The external conditions are better as the CBN has enhanced clarity on the tapering off and better understanding of what the Federal Reserve actually means.
“Initially, when chairman Bernanke talked about the tapering off, people thought it was tightening. They do now understand that it’s just about reducing the rate at which the fed expands its balance sheets.” said Lamido.
The governor said that when the tapering off ultimately happens, a good reaction is expected as they will know that it doesn’t mean lower interest rates. He noted that there has also been much better communication since the first announcement.
Internally, there hasn’t been significant change as fiscal leakages need to be closed and government revenues improved.
By Dara Rhodes in Lagos, Nigeria.