Fuel cut eases inflation pressures

The fuel price reduction implemented with effect from 4 February 2026 provides a timely, measurable easing of cost pressures within the Namibian economy and reinforces our near-term view that inflation dynamics are softening at the margin, even as structural risks remain intact.

The ministry of industries, mines and energy announced a N$1 per litre reduction in petrol and a N$0.50 per litre reduction in both diesel 50 parts per million (ppm) and 10 ppm grades. This adjustment follows material over-recoveries in January, confirming that global fuel import costs had moved meaningfully below regulated pump prices, allowing the automatic pricing mechanism to pass savings back into the domestic economy.

Following the adjustment, pump prices in Walvis Bay are estimated at approximately N$19.58 per litre for petrol, N$19.63 for diesel 50 ppm, and N$19.73 for diesel 10 ppm. While these levels remain elevated relative to pre-2020 norms, the directional move is what matters for inflation momentum.

The price correction arrives as transport inflation has already decelerated into low single digits, with the transport component accounting for roughly 14% of the CPI basket. Within this, logistics-intensive subcomponents such as transport services and distribution-linked goods have shown clear moderation in recent CPI prints, reinforcing the pass-through sensitivity of these categories to fuel cost dynamics and creating a moderate disinflationary impulse over the next two to three months.

We view the importance of this adjustment less through the lens of household fuel savings and more through its second-round transmission channels. Fuel is embedded across Namibia’s entire cost structure, from logistics and freight to food distribution, construction, retail margins and service delivery. A sustained reduction in fuel input costs stabilises price formation across these sectors and acts as a buffer against further margin compression in an already fragile consumer environment, limiting the need for firms to pass on higher operating costs.

At a macro level, the episode once again highlights Namibia’s structural vulnerability to external price drivers. As a net importer of refined fuel, domestic inflation remains highly sensitive to global oil price movements and exchange rate volatility. While this adjustment does not alter the medium-term inflation regime, it meaningfully softens the near-term inflation path and supports the view that the peak in domestic cost pressures is behind us, provided global energy markets remain broadly stable.

In our assessment, this is not a structural turning point, but it is a constructive development. It reinforces the narrative that inflation risks are no longer one-directional and that selective price relief is beginning to flow through the system, offering a stabilising signal in an environment still defined by global uncertainty.
Simonis Storm Research