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Corporate borrowing rises, households remain cautious

Corporate credit showed stronger borrowing demand from businesses, expanding 5.4% year on year (y/y) in December, up from 3.6% in November.

According to analysis by Simonis Storm Securities, this uptick was particularly evident in the mining and fishing sectors, where firms increasingly utilised debt for expansion and capital investment.

This rise in corporate credit demand demonstrated improving risk appetite among corporates.

This was underscored by a private sector credit extension growth rate of 4% y/y in December 2024, the highest level since early 2023. Growth in November 2024 was 3.3% y/y.

In contrast, household credit growth in December remained at 3.1% y/y, unchanged from the previous month.

“This stagnation reflects a subdued consumer appetite for borrowing, influenced by higher real interest rates, weaker income growth, and tighter lending standards,” read the analysis.

The widening gap between business and household credit growth highlights an asymmetric credit recovery, where businesses benefit more from improved financial conditions compared to consumers, notes the report.

As of December 2024, Namibia’s total corporate debt for the month was N$48.4 billion – a N$566.9 million increase from November.

Year on year, corporate credit grew 5.4%, driven by investment in infrastructure, technology and capacity expansion.

Total corporate debt in 2024 was N$622.9 billion, with an average annual corporate credit growth rate of 2.35%. This steady expansion reinforces confidence in Namibia’s investment climate, Simonis adds.

Instalment and leasing credit surged to N$6.3 billion in December 2024, up from N$5.1 billion in December 2023, highlighting increased business interest in leasing arrangements.

Mortgage loans rose slightly, from N$13.674 billion (-3.9% y/y) in November to N$13.761 billion (-0.1% y/y) in December, suggesting renewed interest in real estate investment, likely encouraged by lower interest rates.

Overdraft facilities contracted by 7.6% y/y, although the absolute value increased slightly from N$9.17 billion to N$9.18 billion, marking an improvement from 8.8% y/y contraction in November.

“This suggests businesses are managing cash flows more efficiently or exploring alternative financing sources,” the analysts note.

Meanwhile, Simonis puts Namibia’s household debt stock at N$68.7 billion as of December 2024, up from N$68.4 billion in November.

“Despite this growth, household credit expansion remains relatively subdued, suggesting cautious borrowing behaviour in response to economic conditions.

“Over the full year, total household debt stood at N$811.2 billion, with an average annual growth rate of 2.56%,” the report notes.

Mortgage lending continued to grow, but at a slower pace, rising from N$45.807 billion to N$45.823 billion, reflecting a 0.8% y/y increase.

While mortgage activity softened, other loans and advances gained momentum, increasing 8.2% y/y in December, up from 8.0% y/y in November.

At the same time, overdraft facilities showed no annual growth, a stark contrast to the 14.7% y/y increase recorded in December 2023. This suggests a reduced reliance on short-term borrowing for immediate expenses.

In contrast, instalment and leasing credit posted a strong 10.6% y/y increase, significantly outpacing the 5.4% y/y growth seen in December 2023. This rise reflects heightened consumer spending on financed durable goods, likely encouraged by increased economic activity and rising disposable incomes.

The evolving composition of household credit highlights a shift in borrowing behaviour, as consumers reduce reliance on overdrafts and mortgage loans while turning to alternative financing options.

“This suggests that households are adjusting their financial strategies in response to changing economic conditions [and] balancing spending priorities amid a dynamic interest rate environment,” note the analysts.

The banking sector’s liquidity position improved slightly in December, with commercial bank liquidity averaging N$8.3 billion, up from N$8.1 billion in November, Simonis notes.

Higher liquidity suggests banks are well-capitalised, ensuring a healthy flow of credit to businesses and consumers, which is particularly important in an environment where interest rates remain high.

In parallel, international reserves rose to N$63 billion, reflecting a 3.6% month on month increase.

“The country’s import cover remained at 4.2 months (or 5.1 months excluding oil and appraisal activities), a critical metric for assessing the country’s ability to meet its external obligations,” adds Simonis.

– email: matthew@namibian.com.na

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