People, say, kept in denial (8)
I believe the answer is:
negation
'denial' is the definition.
(negation is a kind of denial)
'people say kept in' is the wordplay.
'people' becomes 'nation'.
'say' becomes 'eg'.
'kept in' indicates putting letters inside.
'nation' going around 'eg' is 'NEGATION'.
(Other definitions for negation that I've seen before include "One giant turns out to be a denial" , "Denial of something's existence" , "Making denial" , "Contradiction" , "Cancellation" .)