Namibia’s corporate sector exhibited a noticeable shift towards financial prudence in April, with total business credit contracting by N$47 million month-on-month to settle at N$543.5 billion. This marginal yet significant dip, highlighted in the latest Simonis Storm Private Sector Credit Extension (PSCE) report, signals a growing caution among firms navigating an increasingly complex economic landscape marked by global headwinds and persistent input cost pressures. While corporate credit growth remains substantially stronger than the anaemic 0.6% recorded a year ago, the April easing to 7.1% year-on-year, down from March’s 8.2%, underscores a deliberate move towards more selective borrowing and accelerated repayments.
The slowdown was broad-based across key corporate lending categories, reflecting a nuanced recalibration of business investment strategies. Instalment and leasing credit, a critical indicator of capital expenditure, moderated to 18.5% year-on-year, though it held relatively firm at N$6.5 billion. This resilience points to sustained, albeit more measured, investment in productivity-enhancing assets like vehicles, machinery, and equipment, particularly within the transport, logistics, and energy sectors. Businesses appear to be prioritising essential operational upgrades necessary for efficiency and competitiveness, demonstrating long-term confidence in core operational needs despite wider macroeconomic uncertainty. However, the appetite for long-term property commitments continued to wane. Mortgage credit within the corporate segment slipped deeper into negative territory, falling to -3.1% year-on-year, with outstanding loans shrinking to N$13.2 billion. This retreat underscores a clear reluctance to commit to commercial real estate investments, driven by elevated construction costs, shifting workspace dynamics favouring hybrid models, and a broader corporate trend towards asset-light operational structures.
Other loans and advances, often used for project financing and working capital, also decelerated to 10.7% year-on-year, standing at N$20 billion. This slowdown was attributed to increased repayments and a more discerning approach to new credit uptake, particularly evident in the manufacturing and service sectors where some projects seem delayed or scaled down. Offsetting this trend somewhat was a noticeable pickup in overdraft usage, which rose to 8.3% year-on-year. The overdraft facility total dipped by N$30 million to N$8.6 billion, but the year-on-year growth indicates firms are increasingly utilising these pre-approved short-term credit lines to manage immediate cash flow needs, inventory financing, and seasonal operational peaks. This tactical use of overdrafts signals active liquidity management rather than distress, reflecting a focus on financing day-to-day activity efficiently without overextending long-term debt obligations. Simonis Storm analysts noted that while growth has cooled, “corporate credit appetite remains much stronger than it was a year ago,” attributing the recovery to better access to finance, pockets of sectoral confidence, and accommodative lending conditions. However, they cautioned that “global headwinds and input cost pressures are keeping many firms cautious, prompting more selective and risk-aware borrowing.”
This corporate caution stands in contrast to a modestly improving, though still constrained, household credit environment. Total household debt stock actually increased by N$109 million month-on-month to N$58.6 billion in April, though annual growth remained stagnant at 2.7% year-on-year. The standout within household borrowing was mortgage credit, which rose by N$93.3 million to reach N$45.7 billion, its highest level in 2025, reflecting a 0.9% year-on-year increase. This uptick, occurring despite significant affordability hurdles like high home prices and sluggish wage growth, suggests segments of the market – likely those with stable incomes – are proceeding with home purchases, potentially anticipating future interest rate relief. Instalment and leasing credit, primarily driven by vehicle financing, remained a key pillar of household lending, holding solid at 14.9% year-on-year (N$8.2 billion), supported by competitive offerings targeting middle and higher-income earners. Conversely, households displayed increased restraint in unsecured borrowing, with other loans and advances growth slowing to 7.5% year-on-year. Overdraft usage continued its sharp contraction, plunging -17.2% year-on-year, a clear indicator that lower-income consumers are avoiding short-term debt due to cost-of-living pressures and fragile disposable incomes.
The broader financial backdrop offered mixed signals for future credit extension. Positively, banking sector liquidity improved, with commercial bank cash balances averaging N$9.9 billion in April – the highest level since April 2023 – supported by bond redemptions and diamond sale proceeds. This ample liquidity provides banks with capacity to lend. Furthermore, foreign exchange reserves surged 6.6% month-on-month to N$53.6 billion, bolstered by higher SACU receipts, offering improved import cover (4.2 months) and strengthening the Namibia Dollar peg. Broad money supply (M2) growth also accelerated to 11.6% year-on-year, indicating increased liquidity within the financial system. However, looming inflation risks cloud the horizon. While April’s headline inflation eased to 3.6%, offering temporary relief, Simonis Storm warns of resurgent global inflationary pressures. Upcoming US-China trade negotiations and recurring political noise around potential tariffs (dubbed the “TACO effect” – Trump Always Chickens Out) inject significant uncertainty into global supply chains and freight costs. Combined with Rand weakness and regional production cost increases, Namibia faces potential renewed cost-push inflation later in 2025, which could constrain the Bank of Namibia’s (BoN) ability to lower interest rates.
The monetary policy outlook remains cautiously poised. Simonis Storm expects the BoN to hold the repo rate steady at 6.75% at its June meeting, leveraging the current inflation reprieve to assess risks. They anticipate a potential 25 basis point cut later in 2025, contingent on sustained inflation moderation, currency stability, and alignment with the South African Reserve Bank (SARB), which recently cut its rate to 7.25%. The BoN faces a delicate balancing act: supporting economic recovery through easier credit conditions while safeguarding the currency peg and avoiding imported inflation. The N$47 million dip in corporate credit, while small in absolute terms, is a tangible signal of this cautious business mood. Firms are not retreating entirely; they are strategically channelling funds towards essential, productivity-boosting assets while deferring large-scale, speculative investments and managing short-term liquidity more actively. This measured approach, set against a backdrop of improving liquidity but persistent external risks, defines Namibia’s current corporate credit landscape.