The Effect of Financial Literacy on Energy Consumptions in Ogun State
The main objective of this study is to determine the effect of financial literacy o energy consumptions in Ogun state. The specific objectives are:
- To evaluate the impact of level of education on energy consumption
- To examine the impact spending habits on energy consumption
- To investigate the effect of savings culture on energy consumption
- To assess the effect of investment culture on energy consumption
This chapter contains the conceptual review, theoretical review and empirical evidence relating to financial literacy and energy consumption.
The Concept of Financial Literacy
The core concepts must be clearly defined in order to enhance comparability and consistency across the evidence base. Different researchers and organizations have defined financial literacy in many different ways. This section examines the breadth of existing conceptual and operational financial literacy definitions, compares financial literacy to other related but distinct concepts, and concludes with a discussion of the domain over which financial literacy applies.
It has been used to refer to knowledge of financial products (e.g., what is a stock vs. a bond; the difference between a fixed vs. an adjustable rate mortgage), knowledge of financial concepts (inflation, compounding, diversification, credit scores), having the mathematical skills or numeracy necessary for effective financial decision making, and being engaged in certain activities such as financial planning (Hastings et al,2013). Financial Literacy is inherent with the human rights and considered as the basic and fundamental privilege of human beings. Thilakam, (2012) stated that financial literacy is the ability to understand finance; more specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions through their understanding of finances. Financially literate people can make sound financial decisions, so they are more inclined towards achieving their financial goals, have potentials to hedge themselves against economic shocks and associated risks and eventually contribute toward their economic development. Lack of financial knowledge is the main driver that pulls people away from financial markets (Bernheim & Garrett,2001; Lusardi and Mitchell, 2007; Van Rooji et al, 2011;Yoong, 2010).
Financial Literacy Education as Key to National Development
A 2008 survey showed that about 80% of Nigerians do not have bank accounts with Financial Institutions which makes them financially excluded and lack access to finance. The primary reasons are hardcore poverty and a low level of Financial Literacy (Credit Awareness Nigeria.com, 2013). In countries with diverse social and economic profile like Nigeria, Financial Literacy is particularly relevant for poor households as they are vulnerable to persistent financial pressures. Building financial capacity in Nigeria represents a big step in helping consumers to acquire the skills and knowledge to be capable, confident, and self-reliant when making financial decisions. Promoting Financial Literacy and creating Credit Awareness among Nigerians provide them with the essential knowledge and financial responsibility to make decisions that will better their lives and ultimately grow the economy.
In 2009, the Central Bank of Nigeria (CBN) embarked on a reform programme designed to reposition the Nigerian Financial sector for greater impact on the country’s growth and development. An important aspect of the programme is financial literacy. The key characteristics of effective financial education programs for children and youths are that they are: taught early, developmentally appropriate, and taught with applied curriculum to develop decision-making skills. Getting an early start in financial literacy pays off. Financial literacy brings relevance for all ages. Financial literacy also makes school relevant (George Lucas Educational Foundation, 2013).
This chapter presents the method with which the researcher intends to carry out the study. It deals with the research design, population of the study, sampling technique, sample size, research instrument, the validation and reliability of instrument, the procedure for the collection of data, method for analyzing data.
This study adopted survey research design. The design aims at analyzing and explaining the issues under investigation, the effects financial literacy on energy consumption in Ogun Central Senatorial district, Nigeria through the collection of data at only one point in time without the researcher’s influences in the process. This enabled the researcher to ascertain the effect and relationship that exist between and among the variables of study which is financial literature (independent), and energy (dependent). This method of study has been used by researchers such as Boohene, Marfo-Yadom & Yeboah (2012); Arief, Thoyib, Sudiro & Rohman (2013); Zeebaree & Sron (2017) in similar research his community-based comparative cross-sectional study was conducted between October and December 2017 in urban and rural areas of Ogun Central Senatorial District. There are 6 local government areas (LGAs) in the senatorial district, with a projected population of 1,930,600 by the year 2016.
The selected rural LGA for the study was Odeda LGA. The LGA has a landmass of 1560 km2[ and a projected population of 152,300 for 2016. Odeda LGA has 29 government-owned primary healthcare facilities, 1 government-owned secondary health facility and 19 private health facilities. Abeokuta South LGA was selected as urban LGA for this study. It has a projected population of 348,200 for 2016 and a landmass of 71 km2There are 11 government-owned primary healthcare facilities, 3 secondary health facilities, 1 tertiary hospital and 73 private hospitals in the local government (Shodehinde et al, 2020).
RESULTS AND DISCUSSIONS
The chapter deals with organization and presentation of research data obtained from the respondents. It also captures the background of the population under study. The data is presented in a manner that is easy to interpret and understand. Data analysis was based on the objectives of the study as presented in chapter one. The chapter presents the analysis of data and its interpretation as was collected from the field. Data analysis was done using SPSS (Statistical Package for Social Sciences).
SUMMARY, CONCLUSION AND RECOMMENDATION
This study conducted an empirical enquiry into the relationship between financial literature and energy consumption in Ogun state, Nigeria, while incorporating using variables such as level of education, savings habits, savings culture and investment culture as predictors. The study adopted a survey research design. Questionnaires were distributed to 150 selected respondents. Given the objective of the study, the study employed descriptive and regression analysis. The result shows that all the variables and measures of financial literacy employed are significant contributors of energy consumption. financial development showed a negative link with energy consumption both in the long-run and short-run. This implies that investors’ credit in the Nigerian environment is significantly and sufficiently not tailored towards oil-related energy consumption.
Population growth rate shows different signs in the short-run and long-run. In the short-run, the result shows a negative link with energy consumption. The implication of this in the Nigerian environment is that at the early stage of population growth, the traditional energy source is still considered, as the majority could not access the oil refined products as it is expensive and not too close to the people. However, in the long-run, positive link was revealed between population growth rate and energy consumption. This implies that, the economy’s population is considering more of oil related energy for consumption as it is the most available as an alternative to meet the increasing energy need in the Nigerian economy. This confirms the Kuznets curve theory that as growth increases, energy consumption also increase. Therefore, the study confirms the reality of Kuznets in the Nigerian environment. Investment culture shows different sign effect on energy consumption in the short-run and long-run. Investment has a positive link in the short-run. This implies that investment culture in the short-run is demanded more energy which may call for sectorial energy policy review, while in the long-run, investment reduces oil-related energy consumption. This can be traced to new energy sector developments towards renewable energy sources, enhancing energy diversification.
Financial literacy and inclusion are issues of critical importance as we all strive for a more transparent, robust and sustainable economy, and a fairer society. There is a growing recognition of financial literacy’s importance as a complement to an appropriate and strengthened financial regulatory framework. The road to achieving financial freedom likely contains U-turns, bumps and dead ends. It is very tempting to live beyond personal income but the consequences can negatively impact one’s life for years to come. Being smart about spending, having patience, saving for the things desired, investing for long-term future and being careful with taking on debt are counsels that will ensure individuals stay on course and reach their destinations. The Central Bank of Nigeria is concerned with Financial Literacy Education because there is significant evidence to suggest that improving levels of financial capability can generate substantial benefits for both individuals and also the State.
This study drives home the imperatives of financial literacy education best practices in developing and developed economies emphasise that financial literacy education must be vigorously imbibed and integrated by individuals, private organisations, and government organs if the challenges of poverty and underdevelopment must be meaningfully tackled. The study has also provided an updated account of the efforts of the Nigerian State towards poverty eradication and national development via the instrumentality of financial literacy education for the Nigerian populace
(i) The Central Bank of Nigeria can do a lot to improve financial literacy education in Nigeria by working with providers of financial literacy education in the country, working with the groups to improve efficiency in the delivery of financial education programs, increasing the awareness of the importance of personal financial education, promoting it, and supporting seminars for teachers and coaches on financial literacy education. National campaigns should be encouraged to raise awareness of the population about the need to improve their understanding of financial risks and ways to protect against financial risks through adequate savings, insurance and financial education.
(ii)Financial literacy should be promoted in schools as evidence shows that possession of educational qualifications greatly influenced financial literacy. Financial education should start at school. People should be educated about financial matters as early as possible in their lives. (iii) Financial literacy programmes should be designed for the female gender in all domains of financial literacy. Financial education that creates different programmes for specific sub-groups of investors/consumers
(iv) young people, the less educated, disadvantaged groups) should be promoted.
(iv)Financial literacy education should be made available to the vast population of the self-employed persons in Nigeria; the financial literacy of older workers/ retired workers should be continuously improved; there should be general education on financial planning to all segments. Consideration should be given to making financial education a part of state welfare assistance programmes. Financial education and awareness of employees and related policy tools should be further promoted, both for defined contributions and defined benefits schemes. Appropriate financial information and education required for the management of the future retirement savings and income of individuals in private personal pension plans should be promoted. (v) All tiers of government and the private sector should be involved in the design and implementation of financial literacy programmes.
(vi) Specific websites should be promoted to provide relevant, user-friendly financial information to the public. Free information services should be developed. There should be the promotion of warning systems by the consumer, professional, or other organisations on high-risk issues that may be detrimental to financial consumers’ interests (including cases of fraud).
(vii)International co-operation on financial education should be promoted, including the use of the relevant organisations as international fora to exchange information on recent national experiences in financial education. The use of all available media to disseminate education messages that will achieve wider coverage and exposure should be promoted.
(viii) There ought to be the development of methodologies to assess existing financial education programmes. Financial education programmes which fulfil relevant criteria should be officially recognised. Also, financial education programmes that develop guidelines on study content and accomplishment level for each financial education programme and for each population subgroup should be encouraged.
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