Overall
Private sector credit (PSCE) fell by N$214.2 million or 0.20% m/m in May, bringing the cumulative credit outstanding to N$105.0 billion. On a year-on-year basis, private sector credit grew by 2.66% in May, compared to the 2.74% y/y growth recorded in April. On a rolling 12-month basis, N$2.72 billion worth of credit was extended to the private sector. N$2.34 billion worth of credit has been extended to individuals on a 12-month cumulative basis, while N$498.1 million was issued to corporates. The non-resident private sector decreased their borrowings by N$112.2 million.
Credit Extension to Individuals
Credit extended to individuals increased by 3.98% y/y in May, compared to the increase of 3.91% y/y recorded in April. On a monthly basis, household credit grew by 0.1%, following the increase of 0.6% m/m recorded in the previous month. Mortgage demand by individuals was unchanged on a monthly basis but rose 5.2% y/y. Instalment credit increased by 0.4% m/m and 1.5% y/y, the second consecutive month of increase on an annual basis, following twenty consecutive months of decline. Overdraft facilities extended to individuals increased 1.1% m/m, but increased by 5.1% y/y. Other loans and advances (OLA) rose by 0.2% m/m and 1.3% y/y, displaying a slightly faster rate of increase from the 0.8% y/y growth recorded in April.
Credit Extension to Corporates
Credit extension to corporates contracted for a fourth consecutive month declining by 1.2% m/m, following the 0.8% m/m contraction recorded in April. On an annual basis, growth in credit extension to corporates slowed to 1.2% y/y in May, compared to the 2.1% y/y growth registered in April. On a monthly basis, growth in mortgage loans, other loans and advances (OLA) and overdraft facilities extended to corporates were all stagnant. On a year-on-year basis, mortgage loans contracted 2.4%, while OLA and overdrafts increased 1.4% and 14.9% respectively.
Banking Sector Liquidity
The overall liquidity position of commercial banks deteriorated substantially during May, decreasing by N$2.7 billion to reach an average of N$340.8 million. The BoN attributed the diminishing liquidity position to net transfers by investment managers as well as several cross-border transfers during the period under review. The outstanding balance of repo’s subsequently rose to N$1.1 billion at the last week of the month.
Reserves and Money Supply
As per the BoN’s latest money statistics release, broad money supply contracted by N$1.6 billion or 1.3% y/y in May, compared to the 3.1% y/y increase recorded in April. Foreign reserve balances declined by N$2.2 billion to N$39.0 billion in May. The BoN ascribed the decrease to an increase in government payments as well as foreign currency repurchases by commercial banks.
Outlook
Despite the historically low interest rates, economic activity remains subdued, with individuals unwilling or financially incapable of taking out loans to increase consumption, and corporates who lack confidence to invest in capital projects would rather use the opportunity to de-lever their balance sheets. With Namibia experiencing a third wave of Covid-19 infections, and with it, stricter lockdown measures which hampers economic activity, credit extension is unlikely to improve in the short-term.