By: Nghiinomenwa-vali Hangala
Local commercial banks have collectively agreed to reduce the cost of money by narrowing their margin by a total of 25 basis points (0.25%).
The reduction will be done in two phases, with the first reduction of 0.123% implemented 3 days ago.
The central bank has confirmed that various commercial banks in the country have agreed to reduce the cost of money or the interest they charge consumers and businesses when they borrow. This will make the mortgage rate and any other lending rates 0.25% lower/cheaper by the end of the year.
This is because the reduction is being implemented in two phases: the first reduction of 12.5 basis points took effect as of September 30, 2025, and a further 12.5 basis point reduction is expected to take effect by December 31, 2025.
The commercial bank has done this by reducing the difference between the average interest rate banks charge on loans and that which they pay when they borrow money from the central bank. This means the margins the commercial banks add to the repo rate when they are lending will go down by 0.25%.
The commercial banks are currently faced with disgruntled policymakers expressing disapproval for the various charges banks implement, while MSME owners claim capital to be expensive.
The country’s banks’ margins or spreads have also been higher than their peers in the common monetary area (CMA).
The central bank has confessed that the commercial banks’ interest margins have been historically higher.
“This policy measure aims to narrow Namibia’s historically wide interest rate margins, thereby making credit more affordable for households and businesses,” wrote Naufiku Hamunime, Bank of Namibia acting deputy director of corporate communications and sustainability.
Hamunime added that by lowering borrowing costs, the Bank seeks to stimulate domestic economic activity, support investment, and ease financial pressures on consumers.
Namibia is part of the CMA with South Africa, Lesotho, and Eswatini, but Namibia has historically recorded higher spreads between the repo and prime rates compared to its peers.
Eswatini, Lesotho, and South Africa have kept the spread at 3.50 percentage points, while in Namibia it has been at 3.75 percentage points since 2010.
Hamunime said that by reducing its spreads, Namibia is aligning more closely with its CMA peers, contributing to a more predictable and consistent banking environment across the region.
“This alignment not only strengthens Namibia’s position within the CMA, but also signals progress in addressing structural factors that have previously resulted in higher intermediation costs for Namibian consumers and businesses,” she stated.
BoN governor Johannes !Gawaxab commended the banking sector for responding positively to the guidance.
“This is a significant and necessary step towards ensuring a more equitable and inclusive financial system,” he said.
!Gawaxab added that concerns over the cost of financial services are growing, and the banks’ actions reflect the sector’s willingness to contribute constructively to national economic objectives and to address public concerns.
BoN noted that it would continue closely monitoring developments to ensure that the intended benefits of this intervention are fully realised and that the cost savings are effectively passed on to consumers and businesses. erastus@thevillager.com.na
