UPDATE 2-Nigeria's central bank unexpectedly cuts benchmark lending rate to 12.5%

* Central bank cuts rate by 100 basis points
* Largest cut since 2015
* Governor says Nigeria may avoid recession

(Adds details, analyst, bullet points)
By Alexis Akwagyiram
LAGOS, May 28 (Reuters) - Nigeria's central bank
unexpectedly cut its benchmark lending rate to 12.5% from 13.5%,
the central bank governor said on Thursday, to stimulate growth
in Africa's largest economy in the face of the coronavirus
pandemic.
It is 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 100 basis point cut, two voted for 150 basis
points and one for 200 basis points, said the governor, Godwin
Emefiele.
Africa's top oil exporter faces economic distress from the
coronavirus outbreak and sharp falls in crude prices, which have
triggered a steep decline in growth.
Emefiele said the lower rate would "stimulate credit
expansion to critically important sectors", which in turn would
also stimulate employment and revive economic activity for a
quick recovery in economic growth.
Nigeria's government expects the economy to contract by as
much as 8.9% this year, but Emefiele said the country could
avoid a recession. He said the economy could contract in the second and third
quarters but recover in the fourth with the fiscal and monetary
policy measures put in place by the 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.
"This is a surprise. Not least because, despite the central
bank's relative optimism on growth, the question is really
around the potency of the MPR (monetary policy rate)," said
Razia Khan, chief economist for Africa and Middle East at
Standard Chartered Bank.
Annual inflation rose to 12.34% in April, its highest in
more than two years, as measures to curb the pandemic hindered
economic activity. "The rate cut...means that we have negative real rates
because of rising inflation," Bismarck Rewane, head of
Lagos-based consultancy Financial Derivatives, told CNBC Africa.