UPDATED: In wait-and-see mode, CBN holds rates at 13.5%

ABUJA (Reuters) – Nigeria’s central bank held its benchmark lending rate at 13.5% on Tuesday, as its governor said it would take time to assess measures already taken to support the economy in response to the coronavirus outbreak.

Godwin Emefiele said the bank’s monetary policy committee voted unanimously to retain the rate.

Nigeria relies on crude sales for 90% of foreign exchange earnings and has come under pressure after oil prices plunged amid a price war between Russia and Saudi Arabia. The pandemic has also hit global demand for oil.

Last week the bank devalued Nigeria’s naira currency and announced a stimulus package to support Africa’s biggest economy.

Emefiele said that, in light of recent actions already taken by the bank, the committee “resolved to allow time for the measures to permeate the economy” before deciding on any other steps that may be required.

The move bucks a global trend of monetary easing. Other African countries – including Ghana, Kenya and Congo – have cut their main lending rates in the last few days.

The 10 members of the monetary policy committee who attended the meeting unanimously voted to keep the rate at 13.5%, Governor Godwin Emefiele said in a briefing broadcasted online on Tuesday. That matched the forecast of three of the six economists surveyed by Bloomberg, while the remaining expected a 50-basis-point cut.

Dozens of central banks across the world have cut rates to minimize the fallout of the pandemic, which has forced countries to shut borders, close businesses and lock down entire swaths of their economy.

In Africa central banks acted quickly as well. Ghana reduced its rate to an eight-year low, South Africa eased by the biggest margin in more than a decade and Kenya lowered its rate for the third straight meeting to counter the global slowdown and commodities rout brought by the virus.
relates to Nigeria Bucks Global Trend and Holds Rates Despite Coronavirus
‘Shocking Decision’

”This was shocking decision, because the committee not only deviated from the global easing pattern, but also went against the dovish rhetoric of the bank itself over the past weeks,” said Omotola Abimbola, an analyst at Chapel Hill Denham in Lagos. “The committee is still worried about external sector pressures and rising inflation expectations, but the conflicting policy signals are not going to help already-jittery markets.”

As Africa’s largest crude producer, Nigeria will be especially hard-hit by the pandemic and an oil-price war. The commodity accounts for about 90% of exports and the price drop already forced the central bank to allow the naira to depreciate last week. However, inflation at a 22-month high and the need to prop up the currency may support the case for tight policy for now.

Loosening monetary policy could add stoke inflation, which hit a 22-month high in February, and add pressure to the foreign reserves and currency, Emefiele said.

“The MPC in taking note of the recent actions already taken by the management of the bank, in response to the Covid-19, resolved to allow time for the measure to permeate the economy, while allowing the pandemic to wear out this plateau before deciding on further supporting policy measures,” Emefiele said.

Last week, Emefiele announced about 3.5 trillion naira ($9.2 billion) in measures, which include direct loans to businesses, extending maturities on credit and lower interest rates on loans provided by the regulator to farmers and manufacturers.

As of Tuesday, Nigeria had 44 confirmed coronavirus cases and one death, a 67-year-old former oil official.