In Oriendu Market, Ovim, I learnt the construct of pricing, after school. Lechi, my grandmother, understood the dynamics of the market. On the big Orie market days, every 8 days, Oriendu would welcome the world, with traders from Enugu, Aba, etc arriving for business. Unlike the small Oriendu market (Igbo runs on a 4-day week), the big one has more buyers, flipping the pricing equilibrium where produce could command more money.

“Isi Uwa…if after 4pm, sell this yam lower by …Naira”, she would say [the full name of Ndubuisi is Ndu bu isi uwa meaning life is supreme above all things]. That price reduction did not make sense until later on I realized that from 4pm, those outside traders would begin to depart, and anything not sold would lose value considering that storage facilities were limited.  There was no technology, but timing was used to model the price positioning considering the nature of the product.

Good People, from Oriendu Market to Wall Street, pricing is fundamental and strategic. And the price you put on a product or service is largely inconsequential. The real deal is the perception of the customers on the specific amount. This is where the social science of pricing moves into physics. Yes, two salespeople can introduce the same product to the same customers, and each of the customers will come out with different perceptions of the product price.

In other words, the best Pricing Power is creating perception which will move the customers, without necessarily adjusting the actual price of the product. Yes, how do you make a product seem “cheap” by not actually reducing the actual price but through perception? But note: it goes beyond being “cheap” to affordability since something could be cheap and still not affordable.

The greatest moment in a business is when a company discovers and operates a great business model. Why? It is through a business model that companies create value. Yes, a business model encapsulates the logic of a firm, and the way it combines and uses factors of production to create value for stakeholders.

But how do you create value? Do you go cost plus or value-based pricing? How is that pricing going to help you scale, looking at your marginal cost? Your pricing strategy affects value capture which can shape your unit economics. When the unit economics is bad, you are not SCALING, but growing! The greatest companies SCALE, not just grow. And that happens when revenue and profit grow faster than your cost. So, if you plot the transaction cost, distribution cost, fixed cost, revenue, and profit, against Growth, the first three will be largely flat even as the last two are shooting into space. Go exponential on PROFIT!

Amazing People, when marginal cost continuously tends towards zero (i.e. asymptotically to the horizontal line) even as growth happens, you have a GREAT company. Meet me in class for Physics of Pricing!

Sat, April 12 | 7pm-8.30pm WAT | Physics of Product Pricing and Optimizing Profitability – Ndubuisi Ekekwe | Zoom link

A renewed wave of global economic uncertainty is dimming the lights on Nigeria’s reform-driven optimism, as U.S. investment bank J.P. Morgan pulls the brakes on its bullish stance over the country’s debt instruments.

In a sharp departure from its earlier position, the bank has told investors to exit long positions in Nigerian Open Market Operation (OMO) bills, citing deepening macroeconomic vulnerabilities linked to declining oil prices and an increasingly unstable global economy.

The April 9 research note, titled “Frontier Local Markets Strategy: Reducing risk further,” is the strongest signal yet that foreign appetite for Nigerian debt may be drying up. J.P. Morgan had previously recommended Nigerian treasury bills as a high-yield opportunity, particularly after the Central Bank of Nigeria (CBN) initiated market reforms last year to unify exchange rates and end costly fuel subsidies. But now, with Brent crude heading below $60 per barrel, dangerously close to Nigeria’s budgetary break-even point, the bank is sounding the alarm.

“We’re advising clients to close their positions in Nigerian T-bills,” the report stated, warning that oil below $60 could sink Nigeria’s current account back into deficit and pile pressure on the naira.

The shift in tone comes amid a swirl of global uncertainties. J.P. Morgan pointed to the global tariffs by the U.S. President Donald Trump. The bank says Trump’s stance on sweeping global tariffs could reignite trade wars that hurt emerging markets like Nigeria, where export earnings remain precariously tied to crude oil.

This geopolitical backdrop, coupled with the reality of falling oil prices, now threatens to upend Nigeria’s fragile economic recovery.

CBN’s optimism meets investor caution

Just days before J.P. Morgan’s note, Nigeria’s central bank had offered a more hopeful picture. It reported a $6.83 billion balance of payment surplus in 2024 and said external reserves, which hovered around $23 billion, were expected to climb due to improved oil output and export diversification.

“We anticipate a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment that is expected to boost non-oil FX earnings,” the CBN said.

But that optimism may now be colliding with crude realities. As oil prices tumble, so too do the prospects of a genuine FX buffer. J.P. Morgan warned that if oil remains under $60—a level seen as Nigeria’s fiscal red line—it could trigger renewed dollar demand, spark portfolio outflows, and lead to a current account deficit.

The bank even floated a worst-case scenario: if the tide of oil-linked FX dries up, the naira could weaken past the 1,700/$1 mark. It currently trades over 1,500, but analysts say that’s largely propped up by central bank intervention.

To defend the naira, the CBN has stepped up its interventions. According to J.P. Morgan, the apex bank sold around $550 million into the market in March alone. That figure has since surged past $1 billion this month, based on estimates from financial analysts.

The bank says this increasing reliance on CBN support highlights a deeper vulnerability: Nigeria’s FX market remains too dependent on a single revenue stream—oil.

“Any disruption to CBN dollar inflows—primarily from oil—could create panic in both currency and bond markets,” the note warned.

J.P. Morgan estimates that potential portfolio outflows from Nigeria could hit $10 billion, although it acknowledged that a portion of this is likely locked in illiquid assets or long-term placements. Still, even a fraction of that leaving the system could rattle already-shaky investor confidence.

OMO bills under pressure, yields spike

Beyond the currency market, cracks are now showing in the domestic fixed-income space. The report notes that liquidity in Nigerian T-bills and OMO instruments has thinned significantly, as rising inflation, foreign outflows, and geopolitical shocks spook investors.

Yields on short-dated securities have surged by as much as 300 basis points in recent weeks, a signal that risk appetite is waning. With fewer buyers in the market, the CBN has had to step in—either injecting liquidity or directly participating in auctions to avoid failed bids.

The shift may seem technical, but the implications are broad. When investor demand weakens for government debt, borrowing costs rise. And when a country like Nigeria is already struggling to plug fiscal holes, this compounds the burden.

At the heart of Nigeria’s dilemma is its dependence on oil, which still accounts for more than 90 percent of FX earnings. The government had pinned its hopes on higher crude exports and economic diversification, especially with the Nigerian National Petroleum Company (NNPC) now fully commercialized. But oil’s global downturn is threatening that push.

The country’s fiscal plans are also built on the assumption of improved tax collection and revenue reforms—yet neither has materialized at the pace needed to offset oil volatility.

“The government had hoped for increased FX inflows through oil exports and multilateral support. However, with oil prices falling and no clear path to alternative revenue streams, the pressure on fiscal and external balances is likely to grow,” J.P. Morgan warned.

However, It’s Not All That Bad

Despite the caution, J.P. Morgan hasn’t written Nigeria off entirely. The bank maintains a medium-term positive outlook, suggesting that reforms like the FX unification and subsidy removal will eventually pay off. It also expects the country to continue its shift towards market-determined exchange rates and local revenue mobilization.

But it hinges all that hope on one condition: Nigeria must withstand the current wave of global headwinds without losing control of its currency or fiscal position.

In essence, Nigeria’s economic recovery remains a balancing act—one that is now swaying under the combined weight of geopolitics, oil market dynamics, and investor nerves. And with oil slipping below the red line and Trump’s sweeping tariffs echoing across markets, the outlook seems gloomy.

We continue to wish that the US and China will find how both will operate in this 21st century since they are the REAL countries while others are just voting Present. But besides the mercantilist framework of physical goods, positing that trade must deliver profitable balances, even at the flavour of protectionism, let me add the other “goods”.

Yes, when you add services and software, America wins the world and runs a huge “trade” surplus with every country on earth. Of course, those other “goods” are not cleared at the typical ports, and may not enter some dossiers of nations since they pass via IP addresses of computers, and banks’ digital wallets. In other words, from banking services to digital products which include Google ads, Apple Store, ChatGPT subscriptions, etc does any country come close to the modern “tariff” with US?

When this tariff conversation began, I asked the Nigeria’s trade czar to prepare a small table which shows two things: the physical trade goods surplus Nigeria enjoys over US (US imports crude oil and African foods from Nigeria while we rarely import much from the country) and Services/software (Nigeria has a huge trade deficit there, from Netflix to Microsoft to correspondence banking services). When those are taken together,  President Trump will see that Nigeria is running a trade deficit against the US. And can make our tariff “0%” lol.

In other words, America leads on trade when you combine the traditional and modern trades, and President Trump should include everything in his calculation. Using only the physical goods may not capture much, since those Adam Smith postulations were promulgated well before the invention and scaling of the Internet, and they need to be upgraded.

In summary: If Country A imports physical goods worth $10m  from the US,  and US imports physical goods worth $30m from Country A (usually raw materials), Country A has a trade surplus of $20m. But look deeper, on services, banking and software, Country A is importing things valued at $50m from US, when US records zero from Country A. If we include everything, you can even notice that the US is the one with a comprehensive trade surplus when you include all “ports”, beyond air, land and sea, to include “internet ports”.

Take a look at the ranking of mobile apps and their downloads, the US is top in all categories. So, Nigeria’s trade czar must update its playbook when he/she visits Washington DC to negotiate for the nation. I am confident that the US will understand this point and remove the extra 14% for us because Naira needs space to breathe!

Comment on Feed

Comment 1: Ndubuisi Ekekwe which economical and statistical tools can fairly measure total trade balance in an unbiased way for all trade partners to agree on? Maybe it is already done and should be the basis of trade negotiation

My Response: “which economical and statistical tools can fairly measure total trade balance in an unbiased way” – I will not blame the tools; the issue is the data fed into the tools. Lesotho has a GDP of $2.2b but owns banks which have corresponding banks with New York, use Microsoft software, watch Netflix, use apps stores, etc. It has a trade surplus with the US because it exports jeans but imports minimal physical goods. Check its central bank on what it pays for software, etc, you will see that it is on deficit if ALL goods are included.  The challenge is that people are still feeding tariff data using Adam Smith mercantilism and theory of physical comparative advantages which were purely built on atoms, with no bits and bytes.

Comment 2: Adam Smith’s postulations have since been improved by the Keynesians, New Keynesians, and neoclassical economists to incorporate modern-day technological progress. And ways to measure intangible services over the Internet have been designed as well, in terms of taxation and open economies. But since some of the big companies normally register their businesses in some of the countries they operate in, this changes the game. For instance, Meta in Ireland is seen as a European company by virtue of its incorporation in the EU.

My Response: I am not sure about that. All banks in Nigeria have correspondent banks in New York. Also, it is not the problem of Nigeria if Microsoft US wants to collect money via a shell in Ireland when we know that Ireland did not create Microsoft. As a Central Bank making that trade reconciliation payment, I will ask Microsoft to create your US bucket for me to pay; otherwise, we will not pay you. That you’re using Ireland as a wallet does not mean Microsoft is no more American.  If a vessel leaving Nigeria with crude refuels in Belize before arriving US, would that not still be Nigerian crude?