Banking | Financial Stability
Namibia's Financial Sector Deepens Exposure To Government Debt
The Bank of Namibia and NAMFISA have highlighted increased holdings of Government securities among local banks and retirement funds, alongside household and business pressures that could affect the country's financial stability.
Namibia's financial sector has increased its exposure to Government debt during the first half of 2026, with local banks and retirement funds holding a larger share of their assets in Government securities.
According to the October 2026 Namibia Financial Stability Report issued by the Bank of Namibia (BoN), local banks' holdings of government treasury bills, stocks and bonds have increased from 14.6% of total banking sector assets at the end of December 2025 to 16.1% by the end of June 2026.
The central bank has attributed the increased sovereign-bank exposure to higher holdings of Government securities, noting that the development has strengthened the direct financial link between the banking sector and Government.
The report has assessed the probability of risks arising from this relationship materialising over the following six months as medium, while rating their potential impact on financial system stability as high.
Retirement funds have also recorded sovereign exposure of 14.8% of total assets, slightly above the historical upper quartile of 14.7%.
However, the report has classified this exposure as normal in its prudential dashboard.
The report has further highlighted that increased sovereign exposure among non-bank financial institutions (NBFIs) has deepened their common exposure to domestic yields, fiscal conditions and Government refinancing requirements.
Beyond the exposure to government debt, the joint assessment has also identified pressures on households and businesses, including rising debt levels, the downturn in the diamond sector and the foot-and-mouth disease outbreak.
The report has noted that these developments could place further pressure on household and business incomes, as well as their ability to meet loan repayments.
However, it has assessed their implications for financial stability as contained at this stage.
On the broader banking sector, the report has shown that total banking assets expanded by 7.8% to N$202.8 billion at the end of June 2026.
The growth was mainly supported by increased short-term negotiable securities, net loans and advances, as well as cash and balances held with other banks.
Despite the increased exposure to Government securities, the joint report has found that local banks remained well-capitalised and liquid, while pension funds, insurers and other NBFIs remained financially sound.
In addition, the banking sector's non-performing loans ratio has reported declined to 4.0% in the second quarter of 2026, while its capital adequacy ratio increased from 17.3% at the end of 2025 to 18.6% by the end of June 2026.
The report's stress test assessments have also indicated that banks maintained adequate capital buffers to absorb the assumed shocks under different scenarios.
Meanwhile, aggregate assets in the NBFI sector increased by 4.0% during the first half of 2026 to N$575 billion, while retirement funds remained fully funded at 101.2%, according to BoN.
The organisations has further identified global uncertainty, El Niño, cyber threats and the financial sector's growing exposure to sovereign debt as areas requiring continued monitoring.
It has also highlighted the importance of maintaining the resilience of the financial system to support the continued provision of financial services to households and businesses.
The report has assessed risks to Namibia's financial system as low to moderate, while rating the potential impact of risks arising from the sovereign-financial nexus on financial stability as high.
