Finance
Nigerians and money illusion economy
By Omoh Gabriel, Business Editor
The Central Bank of Nigeria CBN disclosed recently that the desire of the federal government to earn more volume of naira is responsible for the falling value of the currency saying it is difficult to justify exchange rate depreciation where prices were high and the country was an import dependent economy. The only argument for it was that government wants more money. This has resulted in general rise in prices of goods and services across the country the apex bank is contending with.
The federal, states and local governments’ officials, especially politicians and members of the federation account allocation committee are today only interested the high volume of the naira not necessarily what the money can buy in real terms. It is the same story with the average Nigeria worker who is more interested in the nominal wage or salary he earns not the real wage. The Nigeria economy and most Nigerians are in the phenomenon economists (Mayard Kaynes) described as money illusion. The only argument for the various arms of governments asking for higher volume of naira in exchange for the dollar was that they want more money.
CBN in reaction to the demand said “Since part of the objectives of monetary policy was exchange rate stability, it was better to prevent the depreciation of the naira, rather than give government more money and for it to have less to spend in real terms”. In his submissions at the discussion of the monetary policy meeting in January, Sanusi Lamido Sanusi “stressed that the greatest threat to inflation was the anticipated liquidity pressure and that a lot of what was done and achieved by the MPC relied on credibility of the authorities”.
Monetarism, an aspect of economic study, has long seen money as a mere transparent veil. Economic operators in their view are assumed to behave “rationally” in response to the real choices they confront. They are also assumed, if they have “rational” expectations i e, perfect foresight on the basis of all available information, to see through the veil of “money magnitudes” what money can buy for them to what these underlying real choices are, with such remarkable clarity and rapidity that, since they adjust their behaviour in accordance with these real need. But Nigerians seem not to follow this line of thinking and therefor get fooled into believing that the real values behind the veil of money are different from what they actually turn out to be.
In practice to get into circulation, money must be put into the economy by banks, either by purchasing assets or making loans. As they put the money into circulation, the new money works its way slowly through the economy, going bank-by-bank or dealer-by-dealer, until it gets lent to a business or a consumer. Then goods or services are purchased.
This process potentially gives rise to what are called “Cantillon effects” after the early economist Richard Cantillon. Cantillon effects describe the change in the demand for goods and services desired by those entities that get the new money first. As certain entities get more money, their purchasing power increases and so the demand for the goods and services they prefer increases. Due to the shift in demand, prices increase for those specific goods and services and this leads firms to supply more of those goods and services. If these changes tend to be large enough and persistent, a resource reallocation will tend to
occur.
Presuming the new money created is substantial enough to have an impact, it continues to cause
relative prices to change as it circulates through the economy, and resource reallocation continue to
occur. Those who receive the money first are ultimately better off, but those who receive the money last
are worse off because their purchasing power has gone down prior to getting any of the new money.
Consumer loans affect the demand for housing and household goods, whereas business loans affect the demand for capital goods. There is likely a feedback effect from consumer loans to firms’ demand for capital goods. A classical example is if people secure more mortgages at cheaper rates, then firms will find it profitable to build more houses to accommodate this new demand. The firms will demand more of the factors of production for housing, like planks, cement, copper, iron rods and construction workers.
This is what many Nigerian politicians seem to ignore, the fact that the preference of economic agents between money and claims on capital goods as forms of holding wealth affects the real state of the economy, i e, its level of employment and output; a strong preference for money as a form of holding wealth lowers the level of employment in the economy while a “lower liquidity preference” increases the level of employment.
Because many Nigerian politicians at federal, state, and local government levels cannot see beyond the veil of money they imagine that a given volume of money entails a given real wealth hence they loot in billions and hold same in cash abroad. As a result, they do not perceive in any consequential sense the difference between the value that money can give now if deployed for the general good of the people and what value it will generate in the future. This is why there is rising unemployment, decaying infrastructure in the country, drop in capacity utilisation in industries, falling agricultural output, rising inflation, loss in the value of the naira, and a host of other economic malaise.
Nigerian politicians mistake, in other words, a high rate of growth of money income as entailing a high rate of growth of real income, even though this is not the case at all, and even though they had direct experience of it not being the case by the inflation they had endured in the past. What else explains the fact the with higher earnings from crude oil export, the country appears to be getting poorer and funding seemingly inadequate and governments have to run on huge deficit budget. The various levels of government in the country to say the least can not in short see beyond the veil of money across time, just as Keynes had argued they could not do so in any single period.
CBN Governor Sanusi understanding this concept “ cautioned that if the CBN had made a commitment to exchange rate stability, there was a cost in moving away from that position. Consequently, if the Committee felt that the observed inflation level was not sustainable, then they must find an intelligent way to adjust. He emphasised that it was difficult to justify exchange rate depreciation where prices were high and the country was an import dependent economy. Sanusi pointed to clear indications that a moderation in inflation was almost an aberration alluding to the global increase in energy and food prices and Nigeria’s vulnerability as an import dependent nation that also imported oil.
If the various governments started factoring in inflation effects on the value chain when making higher demands for revenue allocations and expectations, then obviously there could be a stable inflation-unemployment trade-off.
Last year “The overall fiscal operations of the Federal Government for the period (January to November, 2010) resulted in a deficit of N 1, 529.33 billion. The deficit was financed through DMO borrowing from the domestic market N 893.79 billion, FGN Share of Excess Crude Account N 199.54 billion, Privatisation Proceeds N 6.36 billion, World Bank Loan N 75.03 billion and Loans from Special Accounts N 337.56 billion. This underscore the fact that because of rising inflation, depreciating naira, what ever comes into the coffer of government is grossly eroded and in real terms the government and Nigerians are getting less value each year for their nominal naira income.
This also explain why in a period of rising oil prices and increase in volume of crude export which puts more money in the hands of government the substantial credit to the Government grew by 67.83 per cent, while credit to the private sector fell by 4.92 per cent (annualized) in December 2010 as against the benchmark of 31.54 per cent for 2010″.
Finance
Afreximbank successfully closed its second Samurai Bond transactions, raising JPY 81.8bn or $527m
African Export-Import Bank said it has successfully closed its second Samurai bond transaction, securing a total of JPY 81.8 billion (approx. USD 527 million) through Regular and Retail Samurai Bonds offerings.
The execution surpasses the Bank’s 2024 debut issuance size, attracting orders from more than 100 institutional and retail investors, marking a renewed demonstration of strong Japanese investor confidence in the Bank’s credit and its growing presence in the yen capital markets.
On 18 November, Afreximbank priced a JPY 45.8 billion 3-year tranche in the Regular Samurai market following a comprehensive sequence of investor engagement activities leveraging Tokyo International Conference on African Development (TICAD9), including Non-Deal Roadshows (NDRs) in Tokyo, Kanazawa, Kyoto, Shiga and Osaka, a Global Investor Call, and a two-day soft-sounding process which tested investor appetite across 2.5-, 3-, 5-, 7-, and 10-year maturities.
With market expectations of a Bank of Japan interest rate increase, investor demand concentrated in shorter tenors, resulting in a focused 3-year tranche during official marketing.
The tranche attracted strong participation from asset managers (22.3%), life insurers (15.3%), regional corporates, and high-net-worth investors (39.7%).
Concurrently, Afreximbank priced its second Retail Samurai bond on 18 November, a JPY 36.0 billion 3-year tranche, more than double the inaugural JPY 14.1 billion Retail Samurai issuance completed in November 2024.
The 2025 Retail Samurai bond also marks the first Retail Samurai bond issued in Japan in 2025.
Following the amendment to Afreximbank’s shelf registration on 7 November 2025, SMBC Nikko conducted an extensive seven-business-day demand survey through its nationwide branch network, followed by a six-business-day bond offering period.
The offering benefited from strong visibility supported by Afreximbank’s investor engagement across the country, including the Bank’s participation at TICAD9, where Afreximbank hosted the Africa Finance Seminar to introduce Multinational Development Bank’s mandate in Africa and its credit profile to key Japanese institutional investors.
MBC Nikko Securities Inc. acted as Sole Lead Manager and Bookrunner for both the Regular and Retail Samurai transactions. Chandi Mwenebungu, Afreximbank’s Managing Director, Treasury & Markets and Group Treasurer, commented:
“We are pleased with the successful completion of our second Samurai bond transactions, which marked a significant increase from our inaugural Retail Samurai bond in 2024, and which reflect the growing depth of our relationship with Japanese investors.
The strong demand, both in the Regular and Retail offerings, demonstrates sustained confidence in Afreximbank’s credit and mandate.
We remain committed to deepening our engagement in the Samurai market through regular investor activities and continued collaboration with our Japanese partners.”
Ecobank Nigeria, a member of Africa’s leading pan-African banking group, has announced the launch of the Ecobank SME Bazaar—a two-weekend festive marketplace designed to celebrate local creativity, empower entrepreneurs, and give Lagos residents a premium shopping experience this Detty December. The Bazaar will hold on 29–30 November and 6–7 December at the Ecobank Pan African Centre (EPAC), Ozumba Mbadiwe Road, Victoria Island, Lagos. Speaking ahead of the event, Omoboye Odu, Head of SMEs, Ecobank Nigeria, reaffirmed the bank’s commitment to supporting small and medium-sized businesses, describing them as the heartbeat of Nigeria’s economy. She explained that the Ecobank SME Bazaar was created to enhance visibility for entrepreneurs, expand market access, and support sustainable business growth.
According to her, “This isn’t just a market—it’s a vibrant hub of culture, commerce, and connection. From fresh farm produce to trendy fashion, handcrafted pieces, lifestyle products, and delicious food and drinks, the Ecobank SME Bazaar promises an unforgettable experience for both shoppers and participating SMEs. Whether you’re shopping for festive gifts, hunting for unique finds, or soaking in the Detty December energy, this is the place to be.” Ms. Odu added that participating businesses will enjoy increased brand exposure, deeper customer engagement, and meaningful networking opportunities—making the Bazaar a strong platform for both festive-season sales and long-term business growth. The event is powered by Ecobank in partnership with TKD Farms, Eko Marche, Leyyow, and other SME-focused organisations committed to building sustainable enterprises.
The Central Bank of Nigeria (CBN) has said that16 banks have so far met the new capital requirements for their various licences, some four months before the March 31, 2026 deadline. The apex bank also indicated that 27 other banks have raised capital through various methods in one of the most extensive financial sector reforms since 2004. Addressing journalists at the end of the Monetary Policy Committee (MPC) meeting in Abuja, CBN Governor Mr Olayemi Cardoso said the banking recapitalisation was going on orderly, consistent with the regulator’s expectations. He said, “We are monitoring developments, and indications show the process is moving in the right direction.” Nigeria has 44 deposit-taking banks, including seven commercial banks with international authorisation, 15 with national authorisation, four with regional authorisation, four non-interest banks, six merchant banks, seven financial holding companies and one representative office.
Cardoso explained that eight commercial banks had met the N500 billion capital requirement as of July 22, 2024, rising to 14 by September of the same year. The number has now increased to 16 as the industry continues to race toward full compliance. He said that the reforms would reinforce the resilience of Nigerian banks both within the country and across the continent. “We are building a financial system that will be fit for purpose for the years ahead. Many Nigerian banks now operate across Africa and have been innovative across different markets. These new buffers will better equip them to manage risks in the multiple jurisdictions where they operate,” Cardoso said. According to him, the reforms would strengthen the financial sector’s capability to support households and businesses. He said, “Ultimately, this benefits Nigerians—our traders, our businesses and our citizens—who operate across those regions. “It should give everyone comfort to know that Nigerian banks with deep local understanding are present to support them. Commercial banks are also creating their own buffers through the ongoing recapitalisation.”
He added that the apex bank considered several factors in determining the new capital thresholds, including prevailing macroeconomic conditions, stress test results and the need for stronger risk buffers. He reassured on the regulator’s commitment to strict oversight as the consolidation progresses. “We will rigorously enforce our ‘fit and proper’ criteria for prospective new shareholders, senior management, and board members of banks, and proactively monitor the integrity of financial statements, adequacy of financial resources, and fair valuation of banks’ post-merger balance sheets,” Cardoso said. He said the CBN remained confident that the banking system would emerge stronger at the conclusion of the recapitalization exercise, with institutions better prepared to support Nigeria’s economic transformation Banks have up till March 31, 2026 to beef up their minimum capital base to the new standard set by the apex bank. Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds.
While most banks have shareholders’ funds in excess of the new minimum capital base, their share premium and share capital significantly fall short of the new minimum definition. The CBN had in March 2024 released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion. Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026. Under the guidelines for the recapitalisation exercise, banks are expected to subject their new equity funds to capital verification before the clearance of the allotment proposal and release of the funds to the bank for onwards completion of the offer process and addition of the new capital to its capital base. The CBN is the final signatory in a tripartite capital verification committee that included the Securities and Exchange Commission (SEC) and the Nigeria Deposit Insurance Corporation (NDIC). The committee is saddled with scrutinising new funds being raised by banks under the ongoing banking sector recapitalisation exercise.
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