Oil prices at 3-week low as rising output risks OPEC-led deal

Oil prices fell to a three-week low on Wednesday on news that Libyan output was recovering from an oilfield technical issue, fuelling concerns that OPEC-led output cuts to reduce global inventories were being undermined by producers outside the deal.
Benchmark Brent oil was down $1.45, or 2.8 percent, at $50.39 a barrel by 1157 GMT, after earlier touching $50.13 a barrel, the weakest since May 10. U.S. light crude traded at $48.43, down $1.23 cents, or 2.5 percent.
Both contracts were on track for their third straight monthly loss.
"Unless some bullish news stops this, prices will fall further in particular now with Brent trading below the post-OPEC low and approaching $50 a barrel," said Carsten Fritsch, commodity analyst at Commerzbank.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed last week to extend a deal to cut production by about 1.8 million barrels per day (bpd) until the end of March 2018.
The initial six-month deal had been due to expire in June.
Oil prices fell when the deal was extended because some investors had hoped for a longer extension or deeper cuts.
"Traders covered short positions ahead of OPEC and some of these have now been re-established," said Ole Hansen, head of commodities strategy at Saxo Bank.
OPEC members Libya and Nigeria are exempt from the cuts, while U.S. shale oil producers are not part of the agreement and have been ramping up production.
Libya's oil production has risen to 827,000 bpd, climbing above a three-year peak of 800,000 bpd reached earlier this month, the National Oil Corporation said, after a technical issue that hit Sharara oilfield was resolved.
Shipping data on Thomson Reuters Eikon shows that, excluding pipeline exports, Libya shipped an average of 500,000 bpd of oil so far this year, compared with 300,000 bpd average for 2016.
Meanwhile, U.S. output has climbed to more than 9.3 million bpd, close to top producers Saudi Arabia and Russia.
Official government data showing weekly U.S. crude inventories will be published on Thursday. Analysts polled by Reuters expected U.S. stocks to have fallen by 2.8 million barrels last week, their eighth straight weekly decline.
Compliance by those signed up to the OPEC-led deal remained high among OPEC members and industry sources said Russian figures for May showed output in line with its pledge.
Saudi Arabia and Russia said on Wednesday that cooperation between OPEC and non-OPEC producers was seen lasting beyond March. "We want to institutionalise cooperation between OPEC and non-OPEC producers," Saudi Energy Minister Khalid al-Falih said.
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Nigerian forex reserves fall to $30.49 bln as of May 25 - central bank

Nigeria's foreign exchange reserves fell to $30.49 billion as of May 25, the lowest level since April 18 and down 0.87 percent from a month ago, central bank data showed on Wednesday.
The forex reserves were up 15.27 percent year-on-year, the data showed.
Africa's biggest economy shrank by 1.5 percent in 2016 in its first annual recession in 25 years, hit by a shortage of hard currency and lower revenue from its dominant oil sector as world crude prices remained under pressure.
The central bank has been intervening on the official market to try to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, but analysts doubt that this pace can be sustained.
The reserves of the OPEC member country have grown by $4.4 billion year to date due to recovery in global oil prices and increased production. The reserves stood at $26.09 billion at the beginning of the year and $26.45 billion a year ago.
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Nigerian banking shares rally on recovery hopes

First Bank Holdings led a rally of Nigerian banking stocks on Tuesday, fuelled by hopes that Africa's biggest economy will emerge from recession soon, dealers said.
First Bank Holdings, the parent company of Nigeria's oldest commercial lender First Bank, rose 10.02 percent in early trade to 5.38 naira ($0.0171), a level last seen on Oct 10, 2015.
"The market as a whole is reacting to a favourable economic indication. Everybody is now saying the recovery has started, that the economy is on the path of growth," said Rasheed Yusuf, a senior stockbroker.
"The shares of First Bank (are) currently on demand, nobody is willing to sell. We should expect this trend to continue for the next few weeks," Yusuf said, adding that First Bank shares were valued cheaper than its peers.
United Bank for Africa, was up 3.73 percent at 7.80 naira per share, Zenith Bank  rose 8.63 percent to 20.78 naira.
The overall market index hit its highest in more than 10 months as investors responded to more favourable economic indicators, traders said.
The OPEC member country said last week it was moving out of recession after data showed its economy shrank a further 0.52 percent year-on-year in the first quarter, which was less than the revised contraction of 1.73 percent in the fourth quarter of last year.

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Nigeria's central bank to sell $100 mln at forward, spot forex auction

Nigeria's central bank said on Tuesday it will sell $100 million at a special wholesale spot and forwards auction to improve dollar liquidity in the foreign exchange market and curb pressure on the local currency.
The bank, in a notice to commercial lenders, said the dollar auction would be both for spot and forward settlements and would be settled within the next 60 days.
Africa's biggest economy shrank by 1.5 percent in 2016 in its first annual recession in 25 years, hit by a shortage of hard currency and lower revenue from its dominant oil sector as world crude prices remained under pressure.
The central bank has been intervening on the official market to try to narrow the spread between the official interbank and black markets. It has sold around $4 billion since February, but analysts doubt that this pace can be sustained.
Nigeria's foreign exchange reserves had dropped 0.87 percent to $30.49 billion by May 25 from a month ago.
The local currency was quoted at 380.33 per dollar at the investor window on Tuesday, according to the market regulator FMDQ OTC Securities Exchange.
It was quoted at 382 a dollar on the black market, while commercial lenders quoted the local currency at 305.85 per dollar on the interbank market.
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Nigeria's stocks rise to 10-month high as interbank rate eases

Nigeria's stock index rose to its highest level in 10 months on Friday, lifted by gains in the banking sector as overnight lending rates eased after central bank cash injections into the banking system.
The index rose by 2.1 percent to 29,064 points on Friday, its highest level since July last year, lifted in particular by gains in First Bank Holdings, which rose the maximum 10 percent.
The rally has helped push the index above 29,000, a milestone for investors, and erased year-to-date losses. Over the course of 2016, stocks fell 6.2 percent.
Other gainers include pan-African banking group Ecobank , up 5 percent, while Guaranty Trust Bank was up 5 percent, Zenith Bank gained 4.99 percent and Dangote Cement rose 2.33 percent.
Overnight placement dropped to around 12.5 percent on Friday from 26 percent last week as banking system liquidity rose. That was spurred by the government distributing roughly 200 billion naira ($657.03 million) in budget allocations to states. The central bank also refunded 131 billion naira in matured treasury bills to lenders.
Nigeria, Africa's biggest economy, distributes revenue from its crude exports among its three tiers of government - federal, state and local. A portion of state and local government revenues passes through the banking system.
"The market was short of about 21.62 billion naira on Thursday, but with the injection of cash by the central bank, liquidity positions were reversed to positive, which helped to push down the cost of borrowing," one senior currency trader said.
The interbank rate, which reflects the level of naira cash liquidity in the banking system, is expected to rise again next week as the central bank resumes its intervention in the foreign exchange market, traders said.

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Nigeria's 'bad bank' says nearing sale of Peugeot car assembly plant to Dangote

The Asset Management Company of Nigeria (AMCON), the country's 'bad bank' set up following the banking crisis, is close to selling Peugeot Automobile Nigeria (PAN) Ltd, a local car assembly joint venture, to Africa's richest man, Aliko Dangote, and two Nigerian states.
"We have concluded all processes on the bids since about two months ago, all we are waiting for (now) is the approval of the central bank," Ahmed Kuru, AMCON's chief executive, told Reuters on Friday.

Kuru, AMCON ceo

PAN, a Nigerian vehicle assembly plant located in Kaduna state, has PSA Peugeot Citroen as its technical partner with a capacity to assemble 90,000 cars a year, according to its website.
Dangote, in alliance with the states of Kaduna and Kebbi and the Bank of Industry (BOI) development bank made a bid to acquire a majority stake in PAN last year as AMCON seeks to sell off some of the assets it acquired in the wake of the banking crisis.
Dangote's eponymous group of companies is active in cement, oil, food and sugar, and is expanding into farming.
The automaker is worth over 15 billion Nigerian naira ($49 million) according to its last valuation, Kuru said, but declined to name the company Dangote and his partners are using to acquire the automaker.
AMCON, set up in 2010 to clean up the banking system following a $4 billion rescue of nine lenders that came close to collapse, took over PAN after buying up its debt and converting it to equity.

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Nigeria oil governance bill aims to break up state oil company NNPC

The long-awaited oil governance bill passed by Nigeria's upper chamber of parliament proposes breaking up the state oil company into three commercial entities supported by a regulatory body and a fund to oversee the distribution of money.
The Petroleum Industry Governance Bill passed on Thursday by the Senate, is part of planned reforms that make up the sprawling Petroleum Industry Bill (PIB), discussed for over a decade following several redrafts, aimed at revamping the OPEC member's energy sector.
The PIB is a central plank of President Muhammadu Buhari's reform plans because oil sales provide 70 percent of government revenue in Africa's biggest economy but the energy sector has been hobbled by mismanagement and endemic for decades.
The governance bill - which must be passed by the lower chamber of parliament and receive the president's approval before becoming law - deals with the management of the Nigerian National Petroleum Corporation (NNPC), the powerful state oil company which critics say is opaque and retains too much power.
It is one of a number of expected bills under the overarching PIB and does not deal with aspects of most interest to oil companies, such as fiscal terms for upstream projects.
The 191-page document states that the objective is to "create efficient and effective governing institutions with clear and separate roles for the petroleum industry" while improving transparency and accountability.
The governance bill proposes the creation of three commercial entities - the Nigeria Petroleum Assets Management Company, National Petroleum Company and the Nigeria Petroleum Liability Management Company.
Assets and liabilities of NNPC would be split between the three companies.
And the bill opens up opportunities for private investment. It says not less than 10 percent of shares of the National Petroleum Company will be divested within five years or its creation, rising to 30 percent within a decade.
The Petroleum Equalisation Fund would be created to "ensure efficient distribution of petroleum products throughout the federation" and also "collect and provide funding for infrastructural development throughout the federation".
And the Nigeria Petroleum Regulatory Commission would oversee compliance with the laws related to the petroleum industry, including the maintenance of environmental standards, and carry out evaluations of national reserves.
The regulatory body would also have the power to grant, amend, renew, extend or revoke any licence or lease required for petroleum exploration.
That power, in a previous version of the bill, lay with the petroleum minister but the governance bill passed by the Senate states that it transferred this to the Commission "to ensure separation of duties and provide for checks and balances".
If the governance bill is passed by parliament's lower chamber, the House of Representatives, it would require presidential approval to become law.
"The bill could still get hung up by political wrangling in the House," said Josh Holland, an analyst from IHS Markit.
Buhari has been on medical leave in Britain since 7 May and has handed over power to his deputy, Yemi Osinbajo.
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Nigeria's Senate passes oil governance bill - Senate Twitter

Nigeria's Senate passed a long-awaited oil governance bill following its third and final reading, it said on its official Twitter feed on Thursday. 
The Petroleum Industry Governance Bill is part of proposed reforms that make up the sprawling Petroleum Industry Bill (PIB), aimed at overhauling the OPEC member's energy industry.
The PIB, which has been discussed for over a decade following several redrafts and is central to President Muhammadu Buhari's reform plans, was broken up into separate parts including governance and fiscal issues to help speed up the debate.
"This Bill is not only for Nigerians but for our investors. We are proud of what has been done," said Senate President Bukola Saraki after the governance bill was passed, according to a tweet on the upper house of parliament's Twitter feed.
Bills require the support of both houses of Parliament and the approval of the president before becoming law. Buhari is on medical leave in Britain and has handed over power to his deputy, Yemi Osinbajo.
The overarching PIB, of which the governance bill is one part, covers everything from an overhaul of the state oil company to taxes on upstream projects. Uncertainty over fiscal terms in the industry has held back billions of dollars of investment.
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OPEC extends oil output cut by nine months to fight glut

OPEC decided on Thursday to extend cuts in oil output by nine months to March 2018, OPEC delegates said, as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.
The cuts are likely to be shared again by a dozen non-members led by top oil producer Russia, which reduced output in tandem with the Organization of the Petroleum Exporting Countries from January.
OPEC's cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.
Oil's earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.
The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs.
By 1050 GMT, Brent crude had fallen 1.5 percent to around $53 per barrel as market bulls were disappointed OPEC would not deepen the cuts or extend them by as long as 12 months.
OPEC oil ministers were continuing their discussions in Vienna. Non-OPEC producers were scheduled to meet OPEC later in the day.
In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC, led by Russia, in 15 years. The two sides decided to remove about 1.8 million barrels per day from the market in the first half of 2017, equal to 2 percent of global production.
Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.
The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russia offering an unusually long duration of 12 months.
"There have been suggestions (of deeper cuts), many member countries have indicated flexibility but ... that won't be necessary," Saudi Energy Minister Khalid al-Falih said before the meeting.
He added that OPEC members Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.
Falih also said Saudi oil exports were set to decline steeply from June, thus helping to speed up market rebalancing.
OPEC sources have said the Thursday meeting will highlight a need for long-term cooperation with non-OPEC producers.
The group could also send a message to the market that it will seek to curtail its oil exports.
"Russia has an upcoming election and Saudis have the Aramco share listing next year so they will indeed do whatever it takes to support oil prices," said Gary Ross, head of global oil at PIRA Energy, a unit of S&P Global Platts.
OPEC has a self-imposed goal of bringing stocks down from a record high of 3 billion barrels to their five-year average of 2.7 billion.
"We have seen a substantial drawdown in inventories that will be accelerated," Falih said. "Then, the fourth quarter will get us to where we want."
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Nigeria seeks to generate 10 Gigawatts electricity by 2020

Nigeria plans to generate about 10 Gigawatts of electricity operational capacity by the year 2020 in a bid to improve capacity in Africa's top oil producer and achieve economic growth, its minister of planning, Udoma Udo Udoma has said.
Udoma, who spoke at the second Kano Economic and Investment Summit, said the government is also looking at renewable energy sources its efforts to boost power supply.
"The government is committed to reviving the manufacturing sector, to achieve an annual growth of 8.5 percent meets 10.6 per cent growth rate by 2020, the minister said in his keynote address.
“We also intend to achieve self-sufficiency in petroleum products during the period. we also want to be an exporter of some key agricultural products such as rice, groundnut, cassava and vegetable oil, among others,” he said.
Africa's biggest economy is in its second year of a downturn brought on by low prices for oil, the country's main export, which has slashed government revenues and hammered the naira currency. Many businesses have had to shut down or lay off workers to survive.
Udoma further noted that the government intended to create no fewer than 15 million jobs for the unemployed persons in the country as part of efforts to fight poverty, particularly among the youth.
He said based on the plan, 3.7 million jobs would be created annually to address the unemployment challenges in the country.
“If you get people out of poverty, you must provide them with jobs, hence our commitment to provide jobs,” he said.
He disclosed that the Federal Government had set aside a certain amount of money in this year’s budget to provide infrastructure for the revival of the free trade zone in Kano.
He said this would give exporters in Kano the opportunity to take advantage of the funds.
“Federal Government is encouraged by the effort of many states for the progress they are making in the agricultural sector of the economy. I am confident the summit will promote investment opportunities in the state and the country at large,” he said.

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Nigeria to sell dollars to clear demand backlog

Nigeria's central bank plans to sell an undisclosed amount of dollars on Tuesday to settle a backlog of foreign exchange demand for airlines, fuel and raw material imports, traders said.
Traders said the central bank had asked commercial lenders to submit bids for dollars to cover the previously unmet demand for hard currency for specific sectors as it tries to improve dollar liquidity and ease pressure on the naira.
"Banks shall not allocate funds for customers LCs (letters of credit) - that have already benefited from past special market intervention sales (SMIS) that are yet to mature," the central bank was quoted as saying in a circular.
Africa's largest economy, grappling with a currency crisis brought on by low oil prices which have hammered its foreign reserves and created chronic dollar shortages, has resorted to regular injections of dollars by the central bank to narrow the spread between the official and black market rates.
It has sold more than $4 billion to various sectors of the economy since the central bank started intervening on the official market in February. Currency traders say this has increased liquidity and helped to ease pressure on the naira.
The naira was quoted at 381.31 per dollar at the investor window on Tuesday, according to the market regulator FMDQ OTC Securities Exchange.
Commercial lenders were yet to put up a quote on the official interbank market by 1216 GMT, but the naira closed at 305.25 a dollar on Monday on the market, while it was quoted at 381 a dollar on the black market.
The naira has firmed on the black market from its record low of 520 to the dollar in February, before the
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Nigeria central bank keeps benchmark interest rate at 14 pct -governor

Nigeria's central bank kept its benchmark interest rate at 14 percent on Tuesday, its governor said, hours after the statistics office said Africa's biggest economy contracted in the first quarter.
This was in line with expectations in a Reuters poll.
Governor Godwin Emefiele said the bank's Monetary Policy Committee (MPC) had voted to retain the headline rate.
"In consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment, the committee decided by a unanimous vote of eight members in attendance to retain the MPR [Monetary Policy Rate] at 14 percent," he said.
The statistics office on Tuesday published data showing that Africa's biggest economy, in its second year of a recession caused by low oil prices, contracted in the first quarter by 0.52 percent.
The central bank's decision to hold the main interest rate was predicted by economists polled by Reuters last week)
The bank also kept its cash reserve ratios for commercial banks at 22.5 percent.
Emefiele also told reporters the bank wanted to end the spread between the black market and official foreign exchange rates, adding that the recent rise of the naira versus the dollar showed that the central bank's policies were working.
"We would prefer a convergence that will go southward rather than northward, but the fact that we have seen the convergence (going) southward gives us a lot of hope that things are working in the right
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Nigeria hopes for oil upturn after economy shrinks again

Nigeria's economy stayed in recession in the first quarter and shrank more sharply than thought at the end of last year, data showed on Tuesday, as signs of growth in the oil sector fuelled hopes of an upturn in coming months.
The economy shrank by 1.5 percent in 2016 for its first annual drop in 25 years, hit by a shortage of hard currency and lower revenues from its dominant oil sector as world crude prices stayed under pressure.
Gross domestic product shrank a further 0.52 percent year-on-year in the first quarter, the National Bureau of Statistics (NBS) said on Tuesday, also revising the fourth quarter contraction to 1.73 percent from 1.30 percent.
The central bank holds a monetary policy meeting on Tuesday and is expected to hold benchmark interest rates at 14 percent, analysts said prior to Tuesday's GDP readings.
Average oil production inched up 0.07 million barrels per day (bpd) to 1.83 million barrels in the first quarter, the statistics office said.
Razia Khan, chief economist Africa at Standard Chartered Bank, said the state of pipeline repairs and a weak base of comparison suggested the oil sector should grow far more sharply from the second quarter.
"Although the (GDP) contraction was larger than expected, what matters is the outlook," she said by email. "Things should get better."
The NBS said the economy's non-oil sector grew by 0.72 percent in the first quarter.
Supported by higher oil revenues, the central bank has in recent weeks succeeded in narrowing the spread in the naira currency's official and parallel market rates.
It has sold more than $4 billion since it started intervening on the official foreign exchange market in February to try to ease pressure on the naira.
The currency has firmed on the black market from a record low of 520 to the dollar hit in February prior to the interventions.

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Africa's growth seen benefiting from rebound in commodity prices

Africa will see a lift-off in economic growth this year and next on the back of a rebound in global commodity prices, an annual report predicted on Monday.
The African Economic Outlook, co-authored by the African Development Bank, the OECD and the United Nations Development Programme, expects the continent's economy to grow by 3.4 percent in 2017 and 4.3 percent in 2018, up from an estimated 2.2 percent last year.
The report was released as the African Development Bank began its annual meeting, this year being hosted by India in the capital of Prime Minister Narendra Modi's home state of Gujarat.
Modi invited African leaders to a summit in 2015 and has sought to promote 'south-south' economic ties with a continent that has a large Indian diaspora but has seen far larger inward investment from China.
The report said that a decline in commodity prices starting in mid-2014 had a devastating impact on several commodity-exporting African economies. Nigeria, for example, which has the biggest share in Africa's GDP, slipped into recession.
Africa has been worryingly dependent on commodities to power economic growth. The fall in raw materials prices inflicted a significant shock on sub-Saharan Africa as fuels, ore and metals account for more than 60 percent of the region's exports.
However, commodities have staged a comeback since late last year, buoyed by an improvement in the world economic outlook together with the return of risk appetite among global investors.
If the rise in commodity prices is sustained, the report said, it would trim the continent's current account deficit to 5 percent of GDP this year from 6.5 percent in 2016.
Africa is expected to witness a marginal improvement in external inflows that are estimated to inch up to $179.7 billion in 2017 from $177.7 billion a year ago.
The report urged the countries in the region to diversify their exports to reduce their exposure to commodity price shocks and take measures to boost trade within Africa.
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Ghana central bank cuts interest rate by 100 basis points to 22.5 pct

Ghana's central bank lowered its benchmark interest rate on Monday by 100 basis points to 22.5 percent, citing a downward trend in inflation towards medium-term targets of 8 percent plus or minus 2 percentage points, Governor Ernest Addison said.
The cut, which economists had expected, reflected a lower threat of inflation despite a rise in the figure to 13.0 percent in April due to higher petroleum prices, Addison said.
"The committee judges that the downside risks to growth outweigh the upside risks to inflation," he said after a Monetary Policy Committee meeting, addressing his first news conference since President Nana Akufo-Addo appointed him in March.
Fitch ratings agency upgraded Ghana's outlook to stable on Friday and said it expected a revival of GDP growth and a decline in inflation and the budget deficit.
Ghana had one of Africa's most dynamic economies due to its exports of gold, cocoa and oil until it was hit by a fall in oil prices and a fiscal crisis caused by government spending on civil service wages.
The country is now following a $918-million International Monetary Fund programme to restore fiscal balance. The programme is set to end in April 2018.
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Kenya Airways' budget carrier plans international flights

Kenyan budget carrier Jambojet expects government approval this month to start flying to destinations outside the country, and will lease more planes to start the flights in the next two years, its chief executive said on Monday.
The airline, fully owned by national carrier Kenya Airways was established in 2014 to cater to local travellers by offering low-cost fares of as little as 3,200 shillings ($30.99) one way.
Jambojet, which carried 600,000 passengers last year using a fleet of Boeing 737s and Bombardier Q-400 planes, will consider possible international destinations after it gets approval, CEO Willem Hondius said.
"We have a long list of routes we could operate," he said, adding they could operate flights jointly with Kenya Airways or target destinations that the parent airline does not serve.
Jambojet offers no frills flights to popular destinations such as the coastal city of Mombasa. It charges for extras like drinks and food.
It started operations with leased planes but it has since started operating its own flights, a move expected to further lower costs, the chief executive said.
Hondius said leasing additional planes would also help address challenges. The carrier was forced to apologise at the start of this year following cancellations and delays during the peak December holiday season.
About a third of Jambojet's customers had never flown before and were enticed by the low prices. Hondius said he expected more growth as the middle class increases.
However, Kenya's national election, scheduled for August, is dampening demand over fears of violence. More than 1,000 people were killed in fighting following a disputed presidential poll in 2007.
"People are a little reluctant to book at this moment. Forward bookings for August do not go very far," Hondius said.
Kenya Airways will release its earnings report for its year to the end of March on Thursday.
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Egypt's interest rate hike to curb growth but not inflation, critics say

Egypt's financial community says Sunday's two-percent interest rate hike, in line with calls from the International Monetary Fund (IMF), will do little to curb rampant inflation and will harm investment at a time when the country needs it most.
The central bank's first hike since a 3-percent rate rise in November is aimed at dealing with inflation - now above 30 percent - as well as demand-side pressures, after the IMF said action on those two factors was vital to keeping Egypt's economic reform programme on track. 
But economists, businessmen and bankers say that inflation in Egypt, where only 10 percent of the population have bank accounts, is due to rising raw materials costs and a hike in rates will not produce the desired effect.
The business community blames IMF pressure for what it says is a wrong decision and says that Egypt's specific business and monetary environment has not been taken into account and requires a different approach.
"It is clear that the IMF is going by the book while Egypt is different to other countries...so what works elsewhere does not necessarily work here. There are different dynamics, such as that less than 10 percent of the population is banked," a Cairo-based banker, who declined to be named, said.
Thirteen of 14 respondents polled by Reuters had expected the central bank to keep interest rates on hold.
"We don't understand the logic of this decision," Prime Holding economist, Eman Negm, said, noting that the rate hike may have the opposite effect of worsening inflation levels by raising borrowing costs for companies.
"The central bank said they are targeting inflation but that is wrong because inflation here is cost-push inflation. They are clearly influenced by the IMF pressures," she said.
Egypt, which has been struggling to revive growth since an uprising six years ago, floated its currency, as well as raising rates, in November. The pound has halved in value since then.
Those moves helped it clinch a 3-year $12 billion IMF loan programme tied to ambitious reforms such as tax hikes and subsidy cuts which saw inflation jump to a three-decade high at 31.5 percent in April.
"I don't understand how they can take such a step, how do they comply with all the IMF's demands? The economy can halt," Cairo Chamber of Commerce board member Alaa El-Saba said, referrring to Sunday's rate hike.
"Borrowing now will cost me (interest of) more than 18 percent. This is a ridiculous figure which will be added to the price of goods," he said.
Egypt's stock market fell 2.5 percent by 11:55 GMT.
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