THE Namibia Inter-bank Settlement System (NISS) continued to maintain high system availability throughout 2021 further recording a settlement milestone of N$1.0 trillion during the reporting year.
This was revealed by the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (NAMFISA) when they jointly released the annual Namibia Financial Stability Report (FSR). The report assesses the stability of the Namibian financial system and its resilience both to internal and external shocks. The report further highlights specific risks emanating from the macroeconomic environment, domestic household and corporate debt, the banking sector, the Non-Bank Financial Institutions sector, as well as the payment and settlement system.
“Despite a slight increase in the value of fraud transactions during the period under review, risks to financial stability from the national payment system remained relatively low,” said the regulators adding that since the 2021 Financial Stability Report (FSR), Namibia’s payment system and infrastructure remained stable and continued to operate efficiently and effectively.
“The Bank of Namibia (BoN) continued to fulfil its regulatory mandate as the overseer of the National Payment System in line with the Payment System Management Act, 2003 (No. 18 of 2003, as amended).”
Regulaors also said that the banking sector remained liquid, profitable and well capitalised during 2021, despite sluggish economic conditions. Growth in total banking sector assets remained positive, with liquid assets well in excess of the statutory minimum liquid assets requirement of 10.0 percent of monthly average liabilities to the public.
“The banking sector was profitable during the period under review, despite unfavourable economic conditions, while also maintaining capital levels above the prudential requirements. Although asset quality – as measured by the non-performing loans ratio to total loans – improved marginally, it remained above the 6.0 percent crisis time supervisory intervention trigger point. Nonetheless, the banking sector was able to manage its credit risks owing to adequate provisions for delinquent loan losses coupled with low write-offs relative to total loans and profits as well as a host of relief measures, that supported the banking sector in managing its credit risks.
“Overall, risks to the banking sector did not appear significant in 2021, therefore posing no real threat to financial stability in Namibia. However, asset quality requires continuous monitoring as well as intervention if and when needed. Going forward, credit risks to the banking sector may increase in 2022 on the back of potential interest rate hikes, inflationary pressures and slower-than-expected economic recovery,” said the regulators.
Domestic economic performance is anticipated to improve in 2022 and 2023, following moderately positive growth in 2021. According to the Namibia Statistics Agency’s March 2022 national accounts, real GDP growth for Namibia, was estimated at 2.4 percent for 2021 from a deep contraction of 7.9 in 2020. As published in the Bank of Namibia February Economic Outlook, growth is expected to accelerate to 3.4 percent in 2022 and to 3.7 percent in 2023. These projected improvements are expected to be broad-based, with robust growth rates across all industries, but particularly in the diamond mining and manufacturing sector. As with the global economy, risks to domestic growth are dominated by health outcomes related to the COVID-19 pandemic, rising energy and food prices.