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Financial Literacy and Investment Decisions in Nigeria

ONWAEZE, Offor, and EHIEDU, Victor C, PhD

Abstract

This study investigated the impact of financial literacy on investment decisions in Nigeria, using secondary data from the Central Bank of Nigeria (CBN) and Enhancing Financial Innovation & Access (EFInA) Reports from 1995 to 2024. The study focused on key financial literacy variables, including Digital Financial Literacy Rate (DFLR), Credit Utilization Ratio (CUR), Formal Account Ownership (FAO), and Participation in Financial Education Programs (PFEP), analyzing their effects on Investment Frequency (INV_FREQ). The research employed Ordinary Least Squares (OLS) regression analysis with E-Views 9.0 to examine these relationships. The results showed that DFLR, CUR, and PFEP had a significant positive impact on INV_FREQ, while FAO did not. The findings suggested that financial literacy, especially digital financial literacy and financial education, was crucial in fostering greater investment participation in Nigeria. The study highlighted the importance of financial education programs in improving individuals' investment behavior and encouraged the implementation of more comprehensive financial literacy initiatives. Furthermore, the study confirmed that Financial Literacy Theory (FLT) and Behavioral Finance Theory (BFT) provided a solid framework for understanding how knowledge and behavioral factors influenced investment decisions. Based on these findings, the study recommended that policymakers focus on improving digital financial literacy, promoting better credit utilization practices, and expanding financial education programs to enhance investment frequency across the Nigerian population. Additionally, efforts were recommended to integrate financial literacy into everyday financial practices, ensuring that individuals not only owned formal accounts but actively engaged in investment opportunities. This approach was expected to foster a more financially inclusive environment, ultimately driving economic growth and develop

Keywords

Digital Financial Literacy Rate; Credit Utilization Ratio; Formal Account

References

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