Central bank preps for potential oil future
Dedicated research team part of bank's arsenal
The discovery of oil is likely to influence the Bank of Namibia's strategy going forward, as it gears up for the future.
The Bank of Namibia (BoN) has started laying the groundwork to assess what the future of an oil-producing Namibia may look like. The research it conducts will help shape policy into what can be considered a nascent industry for Namibia, it added.This is part of the central bank’s strategy going forward, BoN governor Johannes !Gawaxab said at the launch of its annual report for 2023 and dividend declaration of N$511.3 million to the government.
!Gawaxab’s comments come in the wake of renewed interest in Namibia as an exploration destination for oil companies following potentially good prospects for the presence of oil and gas.
Namibia made two oil discoveries along the southern coast in 2022, a third in March 2023, and in July 2023, Shell announced a fourth. The completion of drilling at the Lesedi-1X well confirmed the presence of hydrocarbons, bringing the total oil discoveries made in the Orange Basin to five in less than two years. The latest discovery follows successful finds made by Shell at the Graff-1X, La Rona, and Jonker-1X wells in 2022 and 2023, as well as by the French-based energy major TotalEnergies at the Venus-1X well.
“We will have to look at the potential impact of the discovery of oil and gas on monetary policy and the exchange rate regime, so the first step we must take [is] research around oil and gas,” he said.
As part of the central bank’s efforts to boost Namibia’s intelligence into the sector, !Gawaxab stated that a research team was now part of the bank’s arsenal.
"We have started putting up dedicated research within the bank about oil and gas, so that we can give some facts and figures of what is happening, so that once we have got an oil field, we can talk to the uplifts, to the prices with authority, so that the country can benefit from the information we share."
!Gawaxab had - during the BoN’s last monetary policy announcement - hinted that the discovery of oil and gas deposits could lead to depegging the Namibian Dollar from the South African Rand. The Namibian Dollar is currently pegged to the Rand on a one-to-one basis.
The prospect that Namibia’s economic structure could change may give renewed discussions about depegging from the Rand, !Gawaxab said.
“When you look at what is happening with the economic structure of the country that is changing, what if Namibia becomes a serious oil exporter? What if green hydrogen takes off and we become a large player in that space? We need to think about how we prepare ourselves as a nation in terms of the choice of our exchange regime. But at this stage, the benefits far outweigh the costs,” !Gawaxab was quoted as saying.