The purchase of vehicles continues to decline as government maintains a tight grip over expenditure.
According to the latest data, vehicle sales in April 2018 dipped down by 27.8% month-on-month compared to an increase of 9.9% reported in the prior month.
“This is the first monthly decrease reported since December 2017,” reports Simonis Storm Securities who compiled the data.
On a yearly basis, vehicle sales fell by 12.8% to a mere 825 units compared to a contraction of 18.6% reported in March 2018, the firm says.
According to Simonis Storm, the main contributors to the monthly draw back were the passenger and light commercial vehicles with a decline of 27.9% and 31.1% respectively.
For an economy whose international reserve stock (kept in foreign currency) was last reported as to have gone down sharply by N$4.1 billion since the end of December 2017, the decline in the purchase of vehicles is welcome as it avoids the exit of forex out of the economy.
Central bank’s latest report is such that international reserves stood at N$26.1 billion projected to cover 3.8 months of imports of goods and services, although this signaled a fall from a US$2,15 billion record high witnessed in June last year.
According to Simonis Storm, passenger vehicle sales stood at 373 units in April 2018, down 9.7% from the prior year.
“We have observed that loans extended through instalment credit remains in negative territories as banks are cautious to lend out to risky assets. We believe that the huge drop in vehicle sales, specifically passenger car sales, is attributed to government spending going down which has in turn led to a fall in disposable income,” says SSS.
Experts have cautioned that while some respite has been seen on government finances, public spending will remain constrained and this will not be a key driver of growth in the economy for this year.
Interestingly, Toyota and Volkswagen make up 60% of total vehicle sales and these categories have declined by 28% on aggregate in April 2018.