Nigeria‘s central bank unexpectedly cut its benchmark lending rate to 12.5% from 13.5%, the central bank governor said on Thursday, the first rate cut since March 2019 and the largest since 2015.
Seven of the 10 members of the bank’s monetary policy committee backed a cut by 100 basis points, two voted for 150 basis points and one voted for 200, said Godwin Emefiele, the governor of the central bank.
Nigeria faces economic distress from the coronavirus pandemic and sharp falls in oil prices, which have triggered a sharp decline in growth.
Emefiele said the economy could contract in the second and third quarter but recover in the fourth quarter with the fiscal and monetary policy measures put in place by authorities.
The decision surprised analysts. The central bank has kept interest rates tight for the last two years to curb inflation, support the naira and attract foreign investors to its debt market.
Annual inflation in Nigeria rose for the eighth straight month in April as measures to curb the spread of the novel coronavirus hindered economic activities. Inflation climbed to 12.34% in April, its highest level in more than two years.