N$3.8b credit extended to private sector over past year

Namibis’s private sector received over N$3.8 billion in credit over the last 12 months.

This is nearly double the amount expended during the same period in the previous year, according to data from IJG Securities.

Of this, the firm noted that individuals accounted for N$1.82 billion, while corporations absorbed N$1.98 billion.

“Private sector credit extension (PSCE) increased by 0.7% month on month (m/m), equivalent to N$791.7 million, bringing the annual growth rate to 3.4% as of the end of October,” said IJG.

This comes after adjusting for interbank swaps recorded by the Bank of Namibia (BoN) in non-resident private sector claims, the normalised cumulative credit outstanding reached N$115.41 billion.

According to Simonis Storm Securities (SSS), as of October, Namibia’s corporate debt stock reached N$47.1 billion, reflecting an increase of N$410.5 million from September.

“Corporate credit growth rose to 4.4% year on year (y/y), signalling increased investments in infrastructure, technology and capacity expansion. This broad-based growth suggests a positive outlook for the corporate sector,” noted SSS.

Key corporate credit categories experienced notable growth, instalment and leasing credit demand surged to N$6.2 billion, up significantly from N$4.9 billion in October 2023.

This robust growth highlights increased business interest in leasing arrangements.

“Corporate mortgage borrowing improved, rising from N$13.807 billion in September (0.9%) to N$13.847 billion in October (1.4%). This growth indicates renewed interest in real estate investment, likely spurred by lower interest rates,” SSS added.

While overdraft facilities contracted by -10.4%, the value rose marginally from N$8.960 billion to N$8.968 billion, representing an improvement from -11.8% recorded in September.

“This may reflect businesses managing cash flows more efficiently or turning to alternative financing options,” noted SSS.

Meanwhile, Namibia’s household (individual) debt stock rose slightly to N$68.2 billion in October, up from N$67.8 billion in the prior month, reflecting an annual increase of N$1.8 billion.

Despite this growth, SSS noted that household credit expansion remains subdued, highlighting cautious borrowing behaviour amid a dynamic economic environment.

“Mortgage lending grew modestly from N$45.6 billion to N$45.7 billion, representing a y/y growth rate of 0.9%. This marks a significant slowdown compared to the 3.0% y/y growth recorded in October 2023,” noted SSS.

According to IJG, credit extended to individuals increased by 2.7% y/y in October, as overdraft facilities for individuals saw a 9.3% y/y decline, marking the first annual decrease in this category since June 2023.

“Mortgage loans to individuals grew modestly by 0.9% y/y. Meanwhile, other loans and advances – including credit cards, personal loans and term loans – rose by 7.3% y/y and instalment credit expanded significantly by 12.3% y/y,” noted IJG.

This comes as BoN governor Johannes !Gawaxab on Wednesday noted that PSCE growth averaged 2.2% during the first 10 months of 2024, lower than the 2.5 % recorded during the same period in 2023.

“The sluggish growth has been attributed to weak demand, reinforced by the high-interest rate environment. Since the last Monetary Policy Committee (MPC) meeting, however, annual growth in PSCE improved to 3.4% at the end of October, from 2.1% at the end of August, driven by both businesses and households,” he said.

IJG noted that Namibia’s PSCE is poised for gradual improvement in the coming months, supported by the ongoing interest rate-cutting cycle, which is likely to stimulate borrowing demand.

This comes as the BoN’s MPC reduced the repo rate by 25 basis points to 7% during its final bi-monthly meeting for 2024 to support the domestic economy and maintain the Namibia dollar’s peg to the South African rand.