The Impact of Financial Literacy on Investment Decisions Among Small Scale Retailers of Consumer Goods in North-Central, Nigeria: The Mediating Role of Risk Perception

Abstract

This study investigates the impact of financial literacy on investment decisions among small scale retailers of consumer goods in North-central, Nigeria, while examining the mediating role of risk perception. Utilizing secondary data from the Central Bank of Nigeria (CBN) and Enhancing Financial Innovation & Access (EFInA) Reports from 1995 to 2024, the research analyzes 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) and their effects on Investment Decision (INV_DEC). Ordinary Least Squares (OLS) regression analysis with E-Views 9.0 was employed to explore these relationships. Findings indicate that DFLR, CUR, and PFEP significantly enhance INV_DEC, while FAO does not. The results emphasize the critical role of financial literacy, particularly digital literacy and education, in promoting investment behavior among small scale retailers of consumer goods. Furthermore, the study highlights the importance of risk perception as a mediating factor, suggesting that understanding risk can enhance the positive effects of financial literacy on investment decisions. Recommendations include the need for policymakers to enhance digital financial literacy, promote effective credit utilization, and expand financial education initiatives to improve investment participation among small scale retailers in North-Central, Nigeria.