Credit extended not enough to boost consumer spending- Simonis Storm

As business and consumers remain under pressure due to the weak economy exacerbated by limited government expenditure, Simonis Storm has noted that the amount of credit extended so far is not enough to boost consumer spending.

Their view comes in the wake of the Bank of Namibia having released the money and banking statistics for June 2018.

According to the latest data, Private Sector Credit Extension increased at a slower pace of 5.5% at the end of June 2018 compared to a 7.3% registered in the prior year.

Instalment credit was at record low levels of -5.6% year-on-year at the end of June 2018, while overdrafts stumbled to 0.6% y-o-y in June compared to a 16.1% recorded in the prior year.

On the contrary, credit extended through other loans and advances increased by 10.9% y-o-y in June 2018 compared to a 6.8% registered in the prior year.

Household debt increased by 6.4% to N$54.6bn in June compared to an 8.3% in the prior year.

This is the lowest growth since January 2010. Moreover, credit through unsecured lending continued to register a staggering growth of 11.6% y-o-y at the end of June, fuelled by an increase of 112.2% y-o-y in lease contracts by individuals.

Says Simonis Storm Securities’ Indileni Nanghonga, “In our view the credit extended is not ample to boost consumer spending in these tight economic conditions. Consumers will remain under financial pressure which is currently exacerbated by the rise in petrol prices (inflationary).”

Meanwhile corporate debt rose by 4.2% to N$37.3bn in June compared to a 5.9% in the prior year.

Households and corporates totals N$91.9bn in PSCE debt, a 196.5% escalation over the last 10 years.