In January 2024, credit extended to corporates reached N$46,4 billion, an increase of 2.1% y/y as compared to 0.4% y/y growth reported in December 2023.
According to the Bank of Namibia, the credit growth in corporate sector was primarily driven by increased demand from manufacturing, energy, and agriculture sectors.
Conversely, households experienced a slowdown in credit growth during the same period, with growth decreasing to 2.6% y/y in January 2024 from 3.0% y/y in December 2023.
“Despite the typical trend of individuals seeking loans to kick-start the year, January 2024 saw the slowest credit growth uptake by households since 2021. Additionally, credit extended to non-residents increased to 5.0% y/y in January 2024 from 3.6% y/y in December 2023, reaching a debt stock of N$7,9 billion,” research firm Simonis Storm said.
In January 2024, the growth of private sector credit extension was 2.4% y/y, a slight decrease from the 2.6% y/y recorded in January 2023, but an improvement from the 1.9% y/y observed in December 2023. The growth in January 2024 was supported by the corporate sector while household credit extension moderated.
“Digging deeper into the credit extension categories for both corporates and households, we saw that the corporate credit growth of 2.1% y/y was primarily driven by the instalment and leasing category, which rose to 24.3% y/y in January 2024 from 21.6% y/y reported in December 2023. Overdrafts and other loans and advances also showed growth trajectories. Although mortgage loans showed improvement, they remained in negative territory, with negative growth of -1.7% y/y in January 2024 from -4.4% y/y in December 2023.
As for household credit growth of 2.6% y/y, the slowdown can be attributed to sluggish demand for mortgage loans, which decreased to 2.2% y/y in January 2024 from 2.7% y/y in December 2023. Other loans and advances contracted to 1.1% y/y in January 2024 from a growth of 0.2% y/y in December 2023. However, overdrafts experienced positive growth of 19.2% y/y in January 2024,” Simonis Storm further said.
As of the end of January 2024, the liquidity position of the banking industry declined to N$6.2 billion from the N$7.7 billion recorded in December 2023. The central bank provided assurance that this decrease in market liquidity levels was seasonal, as levels typically experience a dip during the first month of the year.
Moreover, there was a 4.9% m/m increase in the central bank’s international reserves. This growth can be attributed to Southern African Customs Union (SACU) receipts amounting to N$6.1 billion, coupled with the depreciation of the local currency. Additionally, during the national budget speech delivered on February 28, 2024, the Minister of Finance announced that total revenues for the fiscal year 2024/25 are estimated at N$90.4 billion. The significant revenue boost is primarily due to a positive adjustment in SACU receipts, projected at N$28.0 billion, surpassing initial ministry projections.
“The Bank of Namibia has maintained the repo rate at 7.75% and prime rate at 11.50% during its first MPC meeting for the year to support the domestic economy and preserve the currency peg with the South African Rand. Inflation is slightly up, with the central bank projecting 4.8% for 2024, and economic growth is expected to slow to 3.4%. At Simonis Storm, our outlook differs slightly from the central bank’s projections. We are expecting inflation to be slightly higher at 4.9% by the end of the year and anticipate economic growth to be around 2.9%, compared to the Bank of Namibia’s expectations and private sector credit extension to average at 3.5% in 2024,” the research firm said.