The banking sector experienced a notable improvement in liquidity during October 2024, with average liquidity levels rising to N$6.7 billion, up from N$5.9 billion in September.
According to Simonis Storm, this increase was primarily driven by cash inflows from coupon payments, diamond sales, and the redemption of the GC24 bond.
The Bank of Namibia’s international reserves grew by 6.6% m/m to reach N$60.9 billion in October 2024. This increase was largely supported by inflows from the Southern African Customs Union (SACU). The reserves now provide an import cover of 4.1 months, exceeding the international benchmark of 3.0 months.
“When excluding oil exploration and appraisal-related imports, the import cover rose to 4.9 months, up from 4.6 months in September. Over the long term, maintaining robust reserves will require a delicate balance between bolstering domestic liquidity and ensuring exchange rate stability. A sustained decline in reserves could heighten exposure to exchange rate volatility and imported inflation, complicating the Bank of Namibia’s easing cycle and its ability to manage inflationary pressures,” Simonis Storm says.
On the other hand, Namibia’s household debt stock rose slightly to N$68.2 billion in October 2024, up from N$67.8 billion in the prior month, reflecting an annual increase of N$1.8 billion. Despite this growth, household credit expansion remains subdued, highlighting cautious borrowing behavior 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. The deceleration in mortgage uptake is likely due to the lingering effects of elevated interest rates, which have dampened demand for home loans. Other loans and advances increased by 7.3% y/y in October, up from 6.9% y/y in September.
“This growth suggests a potential recovery in consumer confidence, possibly driven by a more favorable economic climate or the effects of adjustments in the interest rate environment. Overdraft facilities saw a sharp contraction of -9.3% y/y, a stark contrast to the 25.1% y/y growth recorded in October 2023.
“This decline may indicate reduced household reliance on short-term credit for immediate expenses, potentially supported by improved liquidity due to tax refunds received during the month. Instalment and leasing credit posted robust growth of 12.3% y/y, a significant improvement compared to the 3.2% y/y growth recorded in October 2023. This surge likely reflects increased consumer spending on financed durable goods, supported by stronger economic activity and potentially higher disposable income levels,” says Simonis Storm.
While household debt continues to rise incrementally, the varying performance across credit categories highlights shifting consumer behavior and evolving economic conditions. The decline in overdrafts and slower mortgage growth, juxtaposed with robust instalment credit expansion, indicates a nuanced response to the broader economic landscape.