Chart of the Week: Behind the BoN’s N$893m Loss

The release of the Bank of Namibia's 2025 Annual Report has generated significant media attention, with much of the focus falling on two figures: a net loss of N$893 million, a 165% decrease from the previous year’s profit of N$1.37 billion, and a dividend to the Government that fell 72.2% from N$720 million to N$200 million.

While these are substantial movements that warrant attention, they also require explanation.On the income side, total income declined by 19.1%, driven primarily by a 21.4% drop in net interest income as lower global interest rates and reduced investment balances compressed returns. Total operating expenses rose 15% to N$849 million over the same period, pushing the cost-to-income ratio to 59.9%.

This represents its highest level in ten years and a sharp deterioration from the 42.3% recorded in 2024. While these were meaningful shifts, they were not the primary drivers of the loss; the Bank's core operations remained profitable throughout the year.The loss was attributable to a single item: a N$1.47 billion currency translation loss.

Because the Bank holds its foreign reserves in foreign currencies, a strengthening Namibian dollar reduces the value of those assets when converted back into local currency. It is therefore important to understand the nature of this loss before drawing broader conclusions about the Bank's financial position.Under the Bank of Namibia Act, the Bank is required to maintain a Foreign Currency Revaluation Reserve to absorb exchange rate movements of this kind.

The reserve was drawn down from N$8.6 billion to N$7.2 billion, representing 11.5% of total assets. For context, a similar cycle occurred in 2017, when the reserve stood at N$5 billion, or 7.7% of total assets. Because the currency loss is transferred into this reserve before distributable earnings are calculated, the Bank was still able to identify N$553 million as available for distribution and pay a N$200 million dividend.

When interpreting these results, it is also useful to consider the Bank's mandate. The Bank of Namibia is tasked with maintaining financial and monetary stability, managing the country's foreign reserves, issuing currency, overseeing the banking sector, and advising the Government on fiscal matters, all in support of Namibia's broader economic development.

Within that context, the Bank's performance is most meaningfully assessed against the full scope of its mandate, of which financial results are one important, but not the only, measure.

Fimanekeni Mbodo is an equity analyst at Cirrus Capital.