An investigation of economic policy uncertainty and its effect on investment decisions in Nigeria: Evidence from Abuja (2000–2020).
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Background of the Study :
Economic policy uncertainty (EPU) refers to the unpredictability in government actions that affect economic and financial outcomes. In Nigeria, particularly in Abuja, fluctuations in fiscal, monetary, and regulatory policies have created an environment where investment decisions are often made under conditions of high uncertainty. Since 2000, shifts in policy direction, abrupt regulatory changes, and political instability have contributed to investor caution, affecting both domestic and foreign direct investment flows (Ibrahim, 2023). In Abuja, the capital city and economic nerve center, such uncertainties can distort market expectations and delay long-term investments. Investors face challenges in forecasting policy impacts, which may lead to reduced capital expenditures and hinder economic growth. This study examines the nature and extent of policy uncertainty and its direct impact on investment decisions in Abuja, utilizing econometric models and qualitative analyses of investor sentiment. The research integrates policy review, investment data, and interviews with key stakeholders to provide a comprehensive understanding of how uncertainty influences investment behavior (Chukwu, 2024).
Statement of the Problem
Economic policy uncertainty in Abuja has created a challenging investment climate that undermines long-term growth prospects. Frequent and unpredictable policy changes contribute to market volatility, reduce investor confidence, and lead to delayed or scaled-back investment decisions. This uncertainty limits the effective allocation of capital in critical sectors, stifling innovation and economic expansion. The study aims to identify the key dimensions of policy uncertainty and to assess how these uncertainties impact investment decisions, thereby hampering Nigeria’s broader economic development (Ibrahim, 2023).
Objectives of the Study:
To examine the extent of economic policy uncertainty in Abuja.
To assess its impact on investment decisions.
To propose measures to reduce uncertainty and improve investment confidence.
Research Questions:
How does policy uncertainty affect investment decisions in Abuja?
What are the primary sources of economic policy uncertainty?
What strategies can mitigate the negative impacts on investment?
Research Hypotheses:
H1: Economic policy uncertainty significantly reduces investment levels.
H2: Regulatory unpredictability adversely affects investor confidence.
H3: Clearer policy communication improves investment outcomes.
Significance of the Study
This study is significant as it highlights the impact of economic policy uncertainty on investment decisions in Abuja. Its findings will offer valuable insights for policymakers and investors, promoting the formulation of more stable and predictable policies. By addressing the causes of uncertainty, the study contributes to improved investment climates and sustainable economic growth (Chukwu, 2024).
Scope and Limitations of the Study:
Limited to the topic only.
Definitions of Terms:
– Economic Policy Uncertainty: The unpredictability in government policies affecting economic activities.
– Investment Decisions: Choices made by investors regarding the allocation of capital.
– Abuja: Nigeria’s capital city serving as the focal area.
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