Tuesday 11 May 2021
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Banking sector still stable despite economic crunch

Namibia’s banking sector continues to sail smoothly and making profits with adequate capitalisation in spite of the economic depression and deterioration in the quality of assets, a latest Bank of Namibia Financial Stability report shows.
Banks managed to maintain liquidity levels well above the prudential requirement, during the previous financial period.
However, on the negative asset quality as measured by the non-performing loans deteriorated further in 2018.
This is partly ascribed to unfavourable economic conditions and their concomitant impact on household disposable income and business performance, however this non-performance remained within acceptable limits.
The sector’s liquid assets held stood at N$18.1 billion in 2018, compared to N$15.7 billion in 2017. The liquid assets held by banks have significantly exceeded the statutory required minimum of N$11.6 billion, recording a surplus of N$6.5 billion, said the bank.
The liquidity position in 2018 has therefore been the most favourable over the past three years, the report observes.
“Similarly, the nonbank financial institutions (NBFIs) continued to be financially stable and sound, despite weak economic conditions. The National Payment System (NPS) remained stable and continued to efficiently contribute towards safety and reliability in payments, hence enhancing financial stability in the country. Finally, both household debt and corporate debt increased moderately,” said Bank of Namibia.
The report notes that global financial conditions remained largely accommodative, but characterised by variations across regions which may increase financial stability risks.
At the same time, the local economy is expected to register lacklustre growth which will be met by a projected decline in the global economy. Households continued to be deep in debt.
Said the bank, “Real GDP in Namibia contracted by 0.1 percent in 2018, from a slightly deeper contraction of 0.9 percent in 2017 but is expected to expand by 0.3 percent in 2019. The decline in Namibia’s economic growth during 2018 emanated mainly from the weak performance in both the secondary and the tertiary industries.
The external current account deficit, however, is estimated to have improved during 2018 as a result of increased exports and higher inflows on the services account. Going forward, risk to the domestic outlook remain and include, the persistently low uranium price und unpredictable rainfall.”
At the same time, total foreign private sector debt servicing increased significantly during the period under review.
The bank said foreign debt service cost increased by 20.5 percent to N$14.6 billion in 2018 from N$12.1 billion in 2017. This was mainly due to the servicing of intercompany debt of about N$2.6 billion as well as the repayment of long-term debt by companies in the financial sector estimated at N$918.0 million. The bank also noted that since the last financial stability report, the National Payment System (NPS) remained stable and continued to operate efficiently and effectively. Bank of Namibia reported that it continued to fulfil its regulatory mandate as the overseer of the NPS in line with the Payment System Management Act 18 of 2003, as amended.


“The payment system maintained high system availability with two disaster recovery tests for the Namibia Interbank Namibia Financial Stability Report (NISS) successfully conducted. Significant efforts and initiatives were embarked upon to enhance the payments system infrastructure and to align it to international standards to allow for greater efficiency and security in the NPS. Three new participants were granted access and allowed to participate in the NPS, during the period under review.”

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