Foreigners owe Namibian banks N$7.6bn

Foreigners residing and working in Namibia owe the country’s banks N$7.6 billion as of September 2022, latest figures from the Bank of Namibia show. 

This is a 1.526% increase from N$465.7 million recorded last September, accounting for 6.5% of the country’s total private sector debt. 

Credit extended to the private sector grew by 4.1% y/y in September 2022, compared to 4.6% y/y in August 2022. 

An analysis by research firm Simonis Storm shows that credit uptake by corporates which make up 39.6% of total private sector debt grew by 5.9% y/y in September 2022 compared to 8.2% y/y in the prior month, whereas household credit uptake which accounts for 53.9% of total private sector debt increased by 2.8% y/y in September 2022 compared to 2.0% y/y in the prior month. 

“Specifically, a deceleration in corporate credit extension was mainly driven by repayments on debt from businesses in the construction and services sector according to Bank of Namibia (BoN),” Simonis Storm Economist Theo Klein said. 

“The only debt instruments supporting overall private sector credit growth are household mortgages, both household and corporate installment credit. Households have been net repayers on overdraft debt since March 2022, where net overdraft debt has been decreasing by 3.4% per month since then. Similarly, net overdraft debt for corporates have also been declining since the start of the year, decreasing by 4.3% on average per month year to date (YTD).” 

He notes that local demand for credit remains intact despite higher interest rates in general, with a 75 basis points (bps) repo rate hike forecasted in December 2022, following the 75bps hike of last week, although banks are now fairly more risk averse in general. 

“With credit extension being a leading indicator of investments in the economy, the slow pace of credit growth is concerning for medium-term economic growth,” Klein said.

“When compared to annual economic growth rates, the annual change in capital consumption has exceeded GDP growth rates in the last 3 years, a sign of the acceleration of the obsolescence of equipment. This implies that labour productivity is reducing over time and overall productive capabilities of the Namibian economy is worsening, which could have negative impacts on long run economic development and growth.” 

In 2021 Namibia’s household debt increased by 2.8% to N$61.8 billion in December 2021 from N$60.1 billion in January the same year due to a rise in loans and advances, a daily increase of about N$4.6 million last year.

The household debt stock, however, increased by 2.1%, compared to the N$60.5 billion recorded in December 2020.

 

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