* Nigeria has Africa's largest economy
* Tuesday's rate cut follows 100 bps cut in May
* Rate cut surprised analysts
* Six committee members backed 100 bps cut
(Adds details, quotes, bullets)
By Alexis Akwagyiram
LAGOS, Sept 22 (Reuters) - Nigeria's central bank cut its
benchmark lending rate on Tuesday by 100 basis points to 11.5%
in a surprise move aimed at stimulating growth in Africa's
largest economy.
Nigeria's economy, badly hit by the coronavirus pandemic,
contracted 6.1% in the second quarter and now faces possible
recession in the third quarter, with the government expecting
the economy to contract by as much as 8.9% this year.
Low oil prices have also taken their toll on the continent's
top producer, which relies on crude sales for 90% of foreign
exchange earnings.
Central bank governor Godwin Emefiele said six of the 10
members of the monetary policy committee voted for the cut, one
for a 50-point reduction and three for holding the rate.
Loosening monetary policy "would complement the bank's
commitment to sustaining the trajectory of the economic recovery
and reduce the negative impact of COVID-19", he told a news
conference.
Emefiele said the cut aimed to force banks to lend to help
the economy despite rising inflation.
He said inflation was mainly due to supply side constraints,
adding that cheaper credit to the domestic economy would
stimulate growth.
RISING INFLATION
The central bank has said it aims to maintain inflation
within a target range of 6% to 9%. But annual inflation rose in
August for the 12th successive month to a more-than two-year
high of 13.22% as the pandemic disrupted the supply of goods and
services. In May, the bank cut the rate by 100 basis points to 12.5%
-- the first reduction since March 2019 and the largest since
2015. The bank's monetary policy committee voted to hold the
rate at its last meeting in July.
Tuesday's rate cut came as a surprise to many analysts.
"Given Nigeria's budgetary pressures, creating an
environment that is more conducive to local financing of the
deficit is understandable," said Razia Khan, chief economist for
Africa at Standard Chartered bank. "There will be no immediate
inflation relief, however well-intentioned the policy."
Financial markets were closed when the decision was taken.
Money market rates opened at historic lows of between 0.5% and
1% on Tuesday, while the naira currency eased to 467 per dollar
on the black market due to the excess naira liquidity, traders
said.