The Bank of Namibia (BoN) has directed all commercial banks to narrow the gap between the repo rate and lending rates by 25 basis points in two stages before the end of the year.
“In my capacity as Acting Governor and under the power vested in the Bank by section 3(1) of the Banking Institutions Act, 2023 (Act No. 13 of 2023), I hereby issue the Notice BIA: 1/2025 – Reduction of the Spread Between the Prime Rate, Mortgage Rate and any other Lending Rate and Repo Rate,” said Bank of Namibia Acting Governor Leonie Dunn.
The reduction, according to the central bank directive, must be executed in two stages: 0.125% by 30 September 2025 and a further 0.125% by 31 December 2025.
Banks are required to confirm the implementation in writing, submitting an official acknowledgement signed by their chief executive.
Max Rix, Head of Investment at Simonis Storm, said the apex bank’s directive would have a measured impact on the financial sector and the wider economy.
“From a banking perspective, this directive will narrow net interest margins on prime- and mortgage-linked credit, modestly diluting interest income. However, given the robust capital adequacy and liquidity of Namibian banks, the sector remains well positioned to absorb this adjustment without any systemic risk,” he told The Brief.
Rix noted that while banks might face short-term profit compression, the move is primarily regulatory rather than stimulatory.
“This action does not represent a traditional monetary easing, since the repo rate itself remains unchanged. Instead, it is best understood as a regulatory recalibration to enhance monetary policy transmission by lowering borrowing costs, ensuring that prior policy rate movements filter through more fully to end-users,” he said.
Rix added the measure aims to reduce debt servicing pressures and encourage lending amid subdued private sector credit growth.
“For consumers, the mandated reduction in lending rates will deliver a degree of relief on variable-rate facilities, strengthening household cash flows and supporting consumption resilience,” he said.
According to Rix, the phased approach provides borrowers with a predictable path to lower repayments, helping stabilise non-performing loan ratios.
He said the policy broadly supports household and SME balance sheets, improves credit affordability, and marginally enhances Namibia’s competitiveness within the regional monetary framework.
“Provided banks comply in good faith, the measure should advance financial stability objectives without materially compromising banks’ soundness,” he said.
The Bank of Namibia’s move follows calls from Governor Johannes !Gawaxab last month for commercial banks to reduce their prime lending margins to levels consistent with other Common Monetary Area (CMA) countries.
Currently, Namibia’s margin stands at 3.75%, while countries such as South Africa and Lesotho maintain a 3.5% spread between the repo rate and the prime lending rate.
