The Impact of Macroeconomic Conditions on Nigerian Banks and the Power of Naive Optimism

Feranmi Olaseinde

Hatched by Feranmi Olaseinde

Oct 03, 2023

3 min read


The Impact of Macroeconomic Conditions on Nigerian Banks and the Power of Naive Optimism


In recent times, Nigerian banks have faced significant challenges due to macroeconomic conditions, leading to substantial loan losses. The Central Bank of Nigeria has taken measures to address these issues, including raising interest rates and implementing new policies. However, amidst these challenges, adopting a mindset of naive optimism can prove to be a powerful tool for individuals and businesses alike. This article explores the connection between macroeconomic conditions and Nigerian banks, while also highlighting the benefits of naive optimism in overcoming obstacles.

The Impact of Macroeconomic Conditions on Nigerian Banks:

The Nigerian banking sector has incurred approximately $1 billion in loan losses, with the inclusion of Ecobank bringing the total impaired loans to N748 billion in the first half of the year. These losses can be attributed to the macroeconomic conditions in the country. In an effort to curb inflation, the Central Bank of Nigeria has raised key interest rates from 11.5% to 18.75%, reaching a 15-year peak. This rate hike has put additional pressure on banks, forcing them to increase their impairment charges to protect against potential future losses.

CBN's Response to Regulatory Breaches:

The Central Bank of Nigeria has acknowledged the risk of regulatory breaches, such as exceeding Single Obligor Limits (SOL) and Net Open Position (NOP) limits, as a result of recent FX policy changes. To mitigate these breaches, the CBN has stated that it will grant forbearance to banks that surpass these limits due to policy changes, provided they apply for it. This measure aims to support the banks in navigating the challenges posed by the changing regulatory landscape.

The Power of Naive Optimism:

Naive optimism, the belief that good outcomes are more likely to happen than bad ones, can play a crucial role in overcoming challenges. It involves adopting a positive perspective without dwelling on the potential obstacles or complexities of a situation. Naive optimism is particularly beneficial at the outset of a massive project or challenge, where considering all the problems along the way may discourage one from even starting. By focusing on the belief that the project will be completed successfully, individuals can find the motivation to begin and make progress.

Building Confidence and Trust:

Naive optimism allows individuals to try new things and step out of their comfort zones by shifting their focus away from potential failures. It builds confidence and trust in oneself, even if the desired outcome is not fully achieved. This mindset is reminiscent of the Dun and Krueger effect, where individuals with low skills overestimate their abilities. By embracing a childlike mindset, one can approach learning new things with eagerness and without the fear of failure.

Actionable Advice:

  • 1. Embrace Naive Optimism: Start by adopting a naive optimistic attitude in small areas of your life. Believe that you will successfully complete tasks on your to-do list or have a positive outcome in meetings. Over time, this mindset will become ingrained and extend to other aspects of your life.
  • 2. Practice Mental Hurdle Overcoming: Overthinking and self-doubt can hinder progress. Learn to overcome the initial mental hurdle by faking a naive optimistic attitude until it becomes genuine. Focus on the desire to learn and forget about the likelihood of failure in the early stages of acquiring new skills.
  • 3. Believe in Your Future Self: Emulate the mindset of an ideal Olympic athlete. Believe that you will win the race, even if someone else is faster. This belief will propel you further than if you had focused on the possibility of losing. Remember, there is always another race to win.


The challenges faced by Nigerian banks due to macroeconomic conditions highlight the need for adaptive strategies and resilience. While external factors can create obstacles, adopting a mindset of naive optimism can empower individuals and businesses to overcome challenges and strive for success. By embracing a positive perspective and focusing on the belief in achieving favorable outcomes, one can build confidence, trust, and make progress towards their goals.

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