Business Reporter
PRIVATE Sector Credit Extension (PSCE) slowed further to 4.2% y/y in January 2026, from 4.4% in December 2025.
According to an economist from Standard Bank Namibia, Helena Mboti, the moderation was largely driven by weaker business credit growth, which declined by 1.0 percentage point (ppt) to 3.8% in January 2026 compared to the previous month, alongside still-sluggish (albeit marginally improving) household credit, which edged up 0.3 ppt to 5.8% during the same period.
“The soft outturn reflects subdued demand rather than tightening financial conditions. Corporates continued to make net repayments despite lower lending rates and contained inflation, reducing overall credit uptake. At the same time, the lower rate environment has supported selective household borrowing, particularly in mortgages and overdrafts,” Mboti said.
She added that instalment and leasing credit remains the anchor of PSCE growth, expanding by 17.4% in January 2026, slightly lower than 18.5% in December 2025.
Growth continues to be driven by vehicle purchases by both households and businesses. According to the Cirrus Vehicle Sales report, overall vehicle sales increased by 4.7% y/y, supported by a 6.9% rise in passenger vehicle sales and a 2.1% increase in commercial vehicle sales.
According to the Bank of Namibia’s Monetary and Financial Statistics report, business overdraft demand declined as corporates in the manufacturing, financial and telecommunications sectors used lower borrowing costs to reduce debt burdens through net repayments.
On the other hand, demand for other loans and advances moderated, slowing from 6.6% in December 2025 to 4.7% y/y in January 2026. The deceleration was broad-based but more pronounced among households. Household demand in this category fell by 2.9 ppt to 3.4% y/y, while business demand eased marginally by 0.2 ppt to 6.9%. This suggests that households are taking advantage of lower lending rates to reduce term loan exposure, even as they continue to utilise instalment credit and overdrafts. Business appetite for term lending, meanwhile, remains relatively steady but subdued.
Mortgage credit is inching higher but remains subdued. Overall mortgage growth stood at 0.1% y/y in January 2026, recovering from a 0.1% contraction in December 2025. Business mortgage demand remained in contraction at 0.3% y/y, albeit an improvement from -0.9% the previous month. Household mortgage demand increased marginally by 0.1 percentage point to 0.3% y/y.
Mboti said that the low but improving growth rate suggests tentative improvements in household confidence and willingness to make long-term financial commitments.
“This may reflect behavioural responses to: an accommodative monetary policy, lower lending rates and regulatory signals to manage fees and interest rates, growing optimism around emerging sectors and broader economic activity, or fiscal support. However, the muted pace of growth indicates that house prices and/or mortgage borrowing costs remain elevated relative to income levels. The government’s 5% salary increase in the FY26/27 budget (under the theme “People, Productivity and Prosperity”) should provide some support to mortgage demand going forward,” Mboti said.
International reserves increased marginally by 0.6% to N$51.9 billion in January 2026, largely due to SACU receipts. This translates to an estimated import cover of 3.3 months (3.8 months excluding oil and gas imports).
Mboti added that while still adequate, the downward trend in import cover observed during 2025 points to gradually narrowing reserve buffers.
“This could constrain the central bank’s flexibility to deviate from regional monetary policy in the event of shocks emanating from South Africa or the global economy. Nonetheless, the central bank has emphasised that reserves are estimated at 9.6 times currency in circulation, indicating sufficient capacity to meet short-term debt obligations and underpin macro-financial stability at current levels. We believe the marginal improvements in PSCE are driven by a combination of fiscal support, contained inflation and lower lending rates. However, risks to inflation remain emanating, particularly to headline inflation through higher transport prices, as geopolitical tensions increased notably at the end of February 2026. Higher inflation or a rise in borrowing rates may dampen credit demand going forward. While these risks have not yet fully transmitted into the domestic economy, we are closely monitoring the potential impact of higher inflation on vulnerable households and businesses in Namibia,” Mboti concluded.
PICTURED: Economist from Standard Bank Namibia, Helena Mboti. Photos: File
