Overdraft lending in Namibia saw a significant bounce-back in January, indicating increased financial strain on households early in the year as many rely on short-term credit to meet expenses. Recent data from First National Bank Namibia reveals a 1.4% year-on-year rise in overdraft lending for January 2026, reversing a 10.7% decline in December 2025.
This rebound concludes almost a year of decreasing overdraft activity.
Overdrafts are a type of short-term credit provided by banks, enabling account holders to withdraw more funds than their current balance.
This facility is commonly used by households and small businesses to manage urgent expenses when cash flow is tight.
Economist Cheryl Emvula suggested that the recent rebound probably indicates financial stress experienced by many households following the festive season.
“The improvement in overdraft lending likely reflects post-holiday financial pressure, combined with weak wage growth and constrained household purchasing power,” he said in the latest credit report.
The increase in overdraft borrowing is often seen as a sign that households are struggling to keep up with daily expenses.
“Overdrafts are usually used to manage short-term cash shortages, and an increase in this type of borrowing often reflects financial pressure on households,” he noted.
Overall, private sector lending experienced a slight slowdown at the beginning of the year. In January 2026, the Private Sector Credit Extension (PSCE) increased by 4.2% year-on-year, which is slightly below the 4.4% growth seen in December 2025 but still exceeds the 4.1% growth from January of the previous year. PSCE represents the total funds that commercial banks lend to businesses and households, including mortgages, vehicle loans, business financing, overdrafts, and other credit types.
The slowdown in credit growth was mainly driven by weaker business demand. Corporate credit growth declined to 5.8% in January, although companies still accounted for the largest share of overall lending.
Household borrowing, however, showed a modest improvement, increasing to 3.0% year-on-year in January from 2.7% in December. The rise was mainly supported by stronger demand for overdraft facilities and mortgage loans.
Mortgage lending saw a slight increase, rising to 0.3% year-on-year, driven by a more favourable interest rate environment.
Nonetheless, persistent housing market challenges, such as affordability issues, continue to restrict stronger growth in home loans.
Vehicle financing experienced a slowdown but remained relatively robust. Credit for instalment sales and leasing decreased to 13.6% in January from 15.5% in December, reflecting weaker vehicle sales at the start of the year. Passenger vehicle sales declined to 495 units in January from 541 units in December yet still showed a 6.9% increase compared to the same period last year.
Inflation
Inflation eased further, with headline inflation dropping to 2.9% year-on-year in January from 3.2% in December, mainly due to lower food prices and steady transport costs. Meanwhile, the housing and utilities sector experienced a 4.6% inflation rate in January, up slightly from 4.5% in December, driven by increases in electricity, gas, and fuel prices.
Inflation is projected to stay around 3.5% in 2026, supported by adequate rainfall and improved currency conditions.
Emvula mentioned that the recent civil servant salary increase could provide some relief for households and boost credit demand in the coming months.
However, he cautioned that slow income growth, rising living expenses, and affordability issues are likely to keep household credit growth modest.
-pmukokobi@nepc.com.na