As the United States Federal Reserve plans to begin tapering its quantitative easing programme by January, central banks in emerging markets have started watching financial market developments closely. Analysts had predicted that the Fed monetary policy may affect the performance of financial markets in most emerging markets. The Fed's decision to delay tapering in September had helped to stabilise capital markets in Nigeria and other emerging markets and also eased capital outflows, giving breathing room for many central banks to address domestic risks. A report indicated that countries like Brazil , Indonesia and Turkey with large current account deficits that came under immense market pressure in the summer continued to tighten monetary policy post-September in efforts to calm investors, whereas India scaled back exceptional tightening measures amidst the revival in capital flows and decline in current account deficit. The Central Bank of Nigeria (CBN) recently disclosed the anticipated US quantitative easing programme may lead to further tightening of monetary policy in the country. The Deputy Governor, Financial System Stability, CBN, Dr. Kingsley Chiedu Moghalu had said the Federal Reserve policy would lead to a rise in interest rate also in Europe , and "some pressure on the exchange rate and stock prices due to the impact of capital flows in Nigeria ." Moghalu added: "That is why we do not think we have come to the end of the monetary tightening cycle." Meanwhile, a separate report by Ecobank at the weekend showed that in Nigeria , the corporate bond market has remained small. It showed the fixed income securities had been dominated by the federal government, with more recent issuances coming from several states. Corporate bonds account for less than three per cent of total bonds issued. But the Nigerian corporate bond market is also relatively inactive, reflecting extremely limited secondary market liquidity due to a buy-and hold mentality among local institutional investors. There are currently 16 corporate bonds and 3 quasi-corporate bonds listed on the Nigerian Stock Exchange (NSE). Four bonds were issued in 2010; 10 in 2011; and two in 2012. Most bonds have been issued by the banking sector. Yields at issue generally range from 10 to 18 per cent depending on the timing of issuance, and the corporate yield curve currently extends to 7 years. Of the N275 billion debt issuance programme launched six years ago, the Lagos State Government raised N87.5billion with a fixed interest rate of 13.5 per cent.
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