Private sector credit growth strengthens as overdraft lending surges

Private Sector Credit Extension (PSCE) rose to 4.8% year-on-year in April, up from 4.3% in March, marking the strongest pace of growth recorded so far this year.

According to an analysis of Bank of Namibia data by FNB Namibia, the increase was largely driven by a sharp rebound in overdraft lending across both corporate and household sectors, highlighting growing reliance on short-term financing amid ongoing economic uncertainty.

Corporate borrowing remained the main driver of overall credit growth, accelerating to 5.5% year-on-year in April from 4.4% the previous month. Household credit growth also improved slightly, rising to 4.2% from 4.1%, its strongest level since December 2023.

The most notable shift was in overdraft lending, which expanded by 11.4% year-on-year in April after contracting by 2% in March. Increased borrowing by mining companies contributed significantly to the turnaround, while households also made greater use of overdraft facilities.

Analysts said the trend points to a growing preference for short-term credit rather than longer-term borrowing.

Other categories of credit showed more subdued performance. Instalment sales and leasing credit remained strong but slowed slightly to 20.6% year-on-year, down from 21.2% in March. Meanwhile, growth in other loans and advances weakened sharply to 1.6% from 4.3%, largely due to debt repayments by companies in the commercial and services sectors.

Within the household segment, overdraft lending accelerated to 5.4% year-on-year from 0.5% in March. FNB Namibia said this may reflect increasing financial pressure on consumers as they rely on short-term credit to cover day-to-day expenses.

Pressure on purchasing power

Mortgage lending remained weak at 1.9% year-on-year, unchanged from March, while instalment and leasing credit eased to 14.8% amid a decline in vehicle sales.

“Elevated living costs, coupled with rising inflation, continue to pose a risk to household purchasing power,” the report noted, adding that household credit growth is expected to average around 3% this year.

Corporate borrowing patterns painted a similar picture. While overall credit growth strengthened, much of the increase was concentrated in overdraft facilities, which surged to 12.9% year-on-year after contracting in March.

At the same time, longer-term lending remained under pressure. Other loans and advances contracted by 1%, while mortgage lending deepened its decline to negative 1%, reflecting ongoing challenges in the property market.

FNB Namibia said businesses appear to be prioritising liquidity and balance-sheet management over expansion, suggesting a cautious outlook despite stronger headline credit growth.

Meanwhile, annual inflation accelerated to 3.1% in April from 2.1% in March, driven largely by higher fuel prices linked to tensions in the Middle East. The Bank of Namibia kept the repo rate unchanged at 6.5% in April, with borrowing costs expected to remain elevated for the foreseeable future.

International reserves increased to N$58.8 billion in April from N$51.8 billion a month earlier, supported by SACU receipts and higher foreign currency inflows, while broad money supply growth accelerated to 10.5% year-on-year.