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Lottery and Investments in the Nigerian Context - Essay Example

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The essay "Lottery and Investments in the Nigerian Context" focuses on the critical analysis of the preliminary enquiry into the study of the relationship between lottery and investments in the Nigerian context. It conducts a background analysis of the fundamental research questions…
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Lottery and Investments in the Nigerian Context
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Report on the Pilot Study into the Comparative Analysis of Lottery and Investments and an Evaluation of the Motivation for Lotto Staking amongst PoorPeople in Nigeria Introduction This report provides a preliminary enquiry into the study of the relationship between lottery and investments in the Nigerian context. The report conducts a background analysis into the fundamental research questions. It also provides findings and basic analysis into the preliminary studies that were conducted into the topic. The essence of the study is to provide guidelines on the MBA dissertation of the writer of this article. Thus, this study is a preparatory work on the research question and it provides a basis for the development of broader discussions and analysis in the actual study that will be conducted. Background Risk taking is known throughout the world. Most human beings will concede that returns are commensurate to the level of effort you invest into a given activity. In pre-agrarian societies, it was apparent that the more effort one puts into a given activity, the more returns that individual got. In agrarian societies, what one sowed was what he reaped. This is a general maxim and the more a person puts into a given activity, the more that individual got in return from the activities. The concept of work came with the attitude of people working hard to attain higher returns. In most tax jurisdictions, people are taxed for income from work, income from property and income from investments (Blankson, 2010). Incidentally, most poor people have no property business income nor investments. They tend to have a given source of income like a job or wages for hired activities. These individuals have little or no savings. On the other hand, rich people make a lot of income and due to past excess funds, they tend to invest in property or in other businesses. These investments come with high returns and the returns are high enough to be considered a form of income which merits a tax. Poor people however have limited funds to save, let alone invest. They only have enough to pay for their basic necessities and have little to set aside as extra income. Due to that, they tend to make little. However, the fundamental element and the fundamental assumption of Economics is that human ends are more than their needs. This is a universal desire in all human beings. This is because the average human being has a wide array of expectations and desires. And these needs and wants can only be fulfilled through the attainment of higher earning capabilities. This is a desire that exists in both rich and poor people. By virtue of the fact that the rich have more money, they invest a lot of money into a given venture and this brings about a relatively higher level of income. This enables the rich to get a higher level of returns in order to meet their ends. Poor people also have high desires and expectations. A poor man will want to make enough money with the view of acquiring better assets and also meet his or her needs and expectations. Based on this, the poor and the rich find ways of getting enough money and a regular source of income. Since the poor earn almost an amount that is barely sufficient to pay for their basic necessities, they will always want to find a way of maximising their earnings and their abilities. In doing this, some poor people turn to various approaches and schemes to get rich quickly. One of these means of getting rich instantly is through lottery. In examining the history of lottery, it is remarkable to note that in the era of wars and harsh economic times, Britain increased taxes circa 1800 and also instituted a lottery programme to raise funds to meet public expenditure (Munting, 2009). This was an era between the breakaway of the colonies in North America (United States) and the Napoleonic wars which was a major strain to Britains national resources. Hence, William Pitts choice of a lottery as a source of raising funds comes with some very interesting questions. Research Problem First of all, in a period where people were suffering and the circulation of funds in the economy was limited, why will a respected British Prime Minister consider a lottery ahead of other approaches to raise funds? Secondly there is a question of how viable the lottery scheme was. This is because if there was no money in the system, how could it stay attractive to the commoners? Thirdly, how could the commoners manage to fund their countrys coffers if there was no money in the system? How could it work in the first place? These questions seem to lead to very interesting answers. The first answer is that lottery thrives on numbers. There are many people who stake the lottery. And this means the organisers of lotteries are very likely to get higher returns than what they are giving away. Secondly, lottery schemes remain operational because people do not seem to feel the actual impact of the money they give away. This is because, unlike investments which require huge financial outlays, the lottery takes away an almost insignificant amount of money from individuals at every point in time. Thirdly, the poor always look at the possibility of winning before they stake a lottery. This is because the returns that are promised are disproportionately higher than what a punter is likely to put into the lottery. Obviously, the promise of a higher return comes with a low probability of winning. This is because more people share the obligation between themselves and the organizers get enough to pay off the winnings and also retain a profit. Interestingly, it seems the lottery is just the same as an investment to a rich person. This is because they all seem to have one end in sight – maximising their earning. Whereas the rich will pay more money to secure a guaranteed level of returns on an investment, poor lotto staker will settle for a venture with a lower capital outlay, a lower probability of earning any returns and a much higher return on investment. Thus, in the technical sense, lottery and investment are just about the same thing. They contain the same elements of: 1. Inflows 2. Risk and 3. Returns In principle, they operate in almost the same way. However, most people will not agree on this. Particularly, in a society where a moral stigma is attached to gambling, lottery will be considered blasphemous and most people will will not accept it as a method of earning a livelihood and hence a completely different method of making money. Others will go as far as classifying the lottery on the same level as theft or robbery or prostitution. Another interesting pointer is the question, why do poor people gamble? This question stems from the fact that lottery companies often target poor people and middle-class people. Is it just natural or is it just coincidental? These are issues that can be addressed through a specific research. One possible approach to answering this question is the Game Theory. Twersky and Kahnemann identified that people are likely to take higher risks when they know they have a little or low chance of attaining a desired result (Stanton, 2010). This is seen in cases where people throw in a disproportionate level of resources where they are likely to lose. On the other hand, Trimpop identifies that where a person has a lot of a given resource and an attempt to maximise it will bring a disproportionately high loss, there is a tendency for people to desist from the risk (2012). This tends to explain psychology of people who stake lottery vis-a-vis those who invest their resources in money generating entities. The rich will always weigh their options and minimise their losses because they know they stand to lose if they make the wrong choices. On the other hand, the poor know that they have little money to spend on other ventures. The poor will therefore want to spend the little extra money they make on a venture that promises higher returns. Hence, there is the tendency for the poor to spend some money and take higher risks with the little resources they have. After all, they have limited options. Research Questions Based on these matters and situations, there are some important research questions that come up. The first question relates to the comparative analysis of gambling and investments. This involves the identification of the differences and similarities between lottery and investments. The second aspect of the research is to ascertain the motivation for gambling amongst the poor people in society. This involves why the poor will want to take high risks with their limited resources. And why the rich will always want to invest in ventures that promises a low percentage of returns over a longer period of time but of high monetary worth. Research Aims and Objectives The aim of the research is to conduct a comparative analysis between lottery and investment and an assessment of the motivation for poor people to enter lottery competitions. In attaining this end, the following objectives will be explored: 1. A critical analysis of the differences and similarities between lottery and investments 2. An examination of the elements of the game theory 3. Evaluation of the motives of poor people and their choice to participate in lottery. Research Methodology Research methodology refers to the approaches and methods that will be combined to conduct a study into a given phenomenon (Kothari,2005). In order to conduct this study, there is the need to identify and utilise an interpretivist or anti-positivist approach to deal with the research question. An interpretivist method is a qualitative method which tries to interpret and analyse a given phenomenon. The interpretivist approach uses the different methods and approaches to examine an idea and come up with a conclusion that best defines it as it occurs in the real world. In order to conduct this research, there is the need to deduce the way people view the two concepts under study in the real world – lottery and investments. And also diagnose the actual motivation of poor people in the real world. In order to do this, there is the need to find an appropriate method and an appropriate system of collecting and analysing data in order to conduct the study and present the core findings. Data Collection Data can be collected through a blend of approaches that will answer the different parts or components of the research. Thus, for the following activities, the following methods will be preferred: 1. Differences and similarities between lottery and investment – Semi-structured interviews 2. Consumer psychology and lottery – Structured interview 3. Motivation for gambling – Questionnaire Survey The differences and similarities between lottery and investment can only be examined through a broad scope. This is because there is no clear answer. Hence, the research can be done through the identification of semi-structured interviews where participants can be allowed to come up with their own definition of the core foundations and fundamental concepts on the matter or phenomenon. The semi-structured research approach will provide a very logical and flexible approach to get respondents to provide their actual view of how they see the two approaches to making money. Consumer psychology and lottery can only be examined through a more definite framework. This will require asking a number of experts the same question with the view of getting a consistent set of answers that will be used to formulate a given view and opinion on the matter at hand. This will mean there must be a structured interview with a set of questions that are rigidly defined. This will be sent to a group of professionals to present their view. On the other hand, the motivation of gambling will have to be presented to a set of people who have some tendency to participate in gambling. The essence of the study is to identify what makes a certain section of the population tilt towards gambling even though they do not seem to have much money. Sampling The research will seek to identify trends and activities amongst the poor gamblers of Nigeria, West Africa. Sampling is used when a researcher cannot study 100% of the total population. Clearly, this research cannot study all 150 million Nigerians to identify their view. Thus, there is the need to define a sample and study them. In terms of the sampling, the questionnaire survey will be conducted on 30 Nigerian gamblers who have a history of participating in gambling. These participants will be people who earn low amounts of money and belong to the category of poor people by Nigerian standards. A questionnaire provides information within a given framework. This will be done through an closed ended question and it will seek to gauge specific elements and specific aspects of gambling. This will enable the findings to be put together within a specified scope. Respondents will be able to provide information and ideas that will help in providing some degree of implications about gambling and how people view it and choose to participate in this aspect of making money. The downside of the questionnaire survey is that it is restricted to what the researcher provides to the respondents. There might be reasons that are not disclosed and this might go unnoticed in the study. However, in this case, there is the need to stay within a specific framework rather than hover over a wide range of matters and subjects that might not be relevant to the study. The structured interview identifying the psychology of lotto stakers, the respondents will be drawn from a sample of five respondents from amongst Nigerias experts and psychologists. These individuals will be qualified psychologists and learned individuals who will provide information and guidance on how people choose to gamble rather than invest. A structured interview allows the researcher to remain within a small scope of actions and ask the same kind of questions to different people on the same subject. This ensures uniformity in responses and the researcher will be able to learn and get educated from the submission of the respondents. Finally, the semi-structured interview will be conducted by on three people who have knowledge in investments and lottery. These people will be individuals who have a depth of knowledge in finances and lottery fund management. The advantage of semi-structured interview is that, unlike a structured interview where the scope is so large, the research allows different views and opinions to be put together to provide information about a subject from diverse pointers. Validity Validity studies the extent to which the research tests the variables in the study. In order to ensure the research is valid, the research will use the various approaches and methods that will bring the rightful results. The validity of this research is guaranteed by the kind of sample chosen. This is because the respondents chosen are from backgrounds that ensures description of the elements of gambling in relation to investments. The validity is ensured because the approaches used for the study are also positioned to ensure objectivity and also provide the respondents with an opportunity to provide information in the right way and manner. Reliability Reliability relates to the objectivity of the research instruments. It guarantees that when the same test is ran on different people in the population, the results is the same. In this research, reliability is going to be guaranteed by asking questions in a straightforward manner. The questions in the survey are provided in a set of possibilities which are very different and distinct from each other. However, they reflect the reality of the subjects that are asked. Hence, respondents can choose one that best fit their tendencies. This is supported by the fact that each possibility is mutually exclusive. Reliability for the interviews are guaranteed by the fact that the responses are going to be summarized in a simple and straightforward manner. Data Analysis The data for the research findings will be grouped according to the categories they belong to. Data from the semi structured interview will be put in a way and manner that summarizes the views and opinions of the respondents. The semi-structured interview findings will be put in a way that reflects the statements and submissions made by the respondents in each of the studies. This will provide some degree of information about the questions asked in the study. The responses from the structured information will also be summarized. However, unlike the semi-structured interviews that will be summarized individually, the structured interviews will be put together under broad headings and broad sections. Finally, the questionnaires will be presented in a visual format. This will involve diagrams and charts that show the way and manner in which the different questions were answered by the study. From this, the major trends and the major directions in the views and opinions will be examined and explained in a very critical way and critical manner. This will show the averages and dominant trends that can be used to describe the main psychological drives and motivations for participation in lottery. Preliminary Findings The field work proceeded by conducting semi-structured interviews with three respondents. These respondents were asked about the core elements and core features of gambling and how similar or different it is from investments. The respondents included one investment consultant, one lotto company administrator and a banker. The questions can be found in Appendix 2. The structured interview was also conducted on five different respondents. The interviewees included two psychologists, two marketers with lotto companies and one lotto sales agent. The respondents were granted interviews that lasted 20 minutes each. The questions are found in Appendix 1. The survey of questionnaires were distributed to respondents who had a history with participating in lotto in Nigeria. These respondents are people who have a background in participating in lottery. Appendix 3 shows the questions that were asked in the study. Results of the Structured Interviews The structured interview asked several questions. In order to present them here, they are discussed under the following headings: Why the Poor Gamble Rather than Invest Three of the respondents identified that the main reason why the poor people in Nigeria choose the lottery ahead of investment is that the money they get is so minimal. And hence, investing the money into some kind of venture is likely to yield very little money as returns. Thus, they prefer to gamble in order to get some good returns. On the other hand, two respondents identified that the poor prefer to gamble because of the promise of wealth they will make. They are therefore hopeful that the promised returns will help them to live above the levels of poverty they live within. Why Rich People Invest rather than Gamble The three respondents stood by their original position. The position was that the rich will not gamble too much because they control a lot of money and this money promises high returns if invested. Hence, the rich will rather want to invest in a venture that will bring a high level of returns. One of the two other respondents supported this idea. On the other hand, one interviewee identified that the rich refuse to gamble because the risk profile of gambling is extremely high. Hence, they will rather invest in something that will bring a lower level of return but with a realistic level of risk. Reconciling the two views, it is clear that because the rich control a lot of capital, they are willing to wait over a longer period of time with a higher degree of guarantee to allow them to meet what the gambler might want to attain. Can Losses in Lottery Force The Poor to Consider Investment Two of the respondents stated that most poor people are not likely to consider investment just because they lose continuously. The two interviewees stated that the poor will rather want to gamble and hope for the best because that gives them some degree of escapism. Effectively, the poor will continue to gamble without no end in sight. The three other interviewees stated that continuous losses are likely to get a gambler to reconsider his position in gambling. This is because they might realize that the promise in lottery is vain. Hence, they will rather want to consider investment on the side even if they continue to gamble. This is because most gamblers continue to attain losses and they will rather want to try to get some other source of income to avoid continuous losses in lottery. Connection between Gambling Addition and Poor Gamblers Four of the respondents identified that poor people are likely to fall into a cycle of gambling addiction. And this is because they are more vulnerable than rich people. The explanation given to this is the fact that the poor will invariably find an excuse to remain gambling. One of the respondents identified that gambling addiction is an obsessive disorder and could affect rich people as well. Hence, it is not restricted to the poor only. Source of Hope amongst those who fail to win According to all the respondents, the people who fail to win are enticed by the prize that is on offer. This is because they always envision the prize and the reward and that is what the lotto companies base their expectations and plans. They do this by advertising, promoting and using agents who continue to encourage people to try over and over again. Results of Semi Structured Interviews The semi-structured interviews provided different reactions from the three respondents. This is presented below. Comparison of Lotto and Investment The first respondent stated that lotto and investment were two very different processes for making money. The second respondent identified that shared the similarity of being contracts with the opportunity of making an amount of money. However, they were not the same since investments were more likely to provide a guaranteed income whilst lottery events had little or no guarantee. The third respondent on the other hand stated that investments and lotto were somewhat different. Risks, Returns and Lottery and Investments The first respondent identified that both lottery and investments had risks and returns. However, there was some difference between the two because whereas the risks in lotto were high, the returns were disproportionate and vice versa. The second respondent stated that although he recognizes that lotto and investment both have risks and promised returns, the risks in investments was somewhat negligible whilst the returns were guaranteed. The third respondent on the other hand viewed the two concepts from the standpoint of the rights of the participant. He identified that whereas the rights of the investor was guaranteed and he could easily transfer his investments or exercise his rights over the investments, a lotto staker had an almost negligible right to his lottery ticket. And once he failed to win, a lotto participants ticket was useless. However, investment certificates were almost always a store of value and the stock of investments could be transferred with ease. Game Theory and Lotto/Investment The first respondent conceded that the game theory sums up the psychology of lotto stakers. The second respondent on the other hand argued that lotto is more of an addiction rather than he lack of choice. The third respondent stated that the game theory explains most poor peoples participation in lotto. Survey Results The 30 respondents provided information about what they thought about lotto and their motivation about lotto. Frequency of Participating in the Lotto Average proportion of income spent on Lottery Frequency of Winning the Lottery Reasons for Continuing to Stake the Lotto Possibility of Staking Lotto when Respondent has Enough Assets Analysis This section will analyse the findings in the research. They will seek to interpret and make primary conclusions about the field work. Differences and Similarities between Lottery and Investment The semi-structured interview indicated that although lottery and investment share the element of risk and returns, they had significant differences. The main difference is that the legal structure of investment differs from gambling. This is because investments provides an individual assets and legal rights in some entity. Lotto does not create any such recognizable rights. Lottery has a very short life-span and lottery tickets have no legal value as most entities make it illegal to transfer lottery tickets. Shares and other investment documents are transferable and they are backed by law. They primary similarity between gambling and investment lies in the psychological aspects of decision making. These relate to the risks and the returns. Lottery promises high risks and high returns and that appeals to the prospective gambler. Investments promise lower risks and lower returns over a substantive period of time. Hence, they play a significant role in the decision making of people who hope to stake them. Relationship between Poor people and the Desire to Stake Lotto The structured interview confirm that the poor people of Nigeria choose to participate in the lottery rather than investment is that they have limited money and investing it will bring a little returns. However, some of the responses indicate that they are rather attracted by the promises of making wealth easily without having to work for it. Some of the respondents indicate that there is a psychological motivation for poor people as they see it as some kind of escapism. However, a majority of respondents indicated that the poor will want to consider investments when they win a substantial capital. Gambling addiction is a cycle that most poor people have gotten into. It is a cycle that is strongly linked to poverty and the poor will rather want to gamble than consider investments. The promise of winning keeps the poor gamblers continuously hopeful that they will one day win. The results show a lot of pointers and a lot of indicators. The background of the respondents show that they are very much interested in staking lotto and gambling. The respondents were mainly people who participated in the lottery every week. About half of the respondents spend at least 30% of their total income. This shows that the poor spend a lot in lottery. The respondents also indicated that the respondents seldom win the lottery. Just a few win over more than twice a year. Yet, they continue to stake. The most popular reasons for staking lotto are the fact that it promises a brighter future and the fact that lotto the fact that most gamblers have already spent too much money. However, some people are attracted by adverts and others believe they will make a major win at some point in their lives. Most respondents show signs that even if they make a lot of money and control a lot of assets, they will still participate in the lottery. This shows that it is not only the desire to be rich, but some kind of habit that keeps people interested in staking lotto. Inferences The main inferences I make are that lotto and investments are only similar in terms of risks and returns and this influences people psychologically. However, they differ significantly in legal and financial terms. Poor people have limited money to invest, hence they turn to the lotto with some of their extra money. However, there is more to it than just the desire to be rich. Many gamblers amongst poor Nigerians are in a habit and cycle of gambling and this keeps them gambling even though they hardly win. Evaluation of Pilot Study The pilot project gave some basic insights into the topic. This was very basic and very fundamental. However, it provides some initial explanations of the two main components of the research. The scope is however woefully limited. There is the possibility of expanding the scope to include important things and important pointers like increasing the number of respondents and enhancing the quality of questions. Reflections I have been able to put in place a number of elements and components of research methods and conducted some research. I will want to re-evaluate the methods and the findings in order to come up with a more robust research methodology for the final research that will be conducted into the respective variables. References Blankson, A. (2010) Taxation London: Lulu Books. Kothari, C. R. (2005) Research Methodology New Delhi: New Age Publishing. Munting, R. (2009) An Economic and Social History of Gambling in USA and Britain Manchester: Manchester University Press. Stanton, A. A. (2010) Neuroeconomics and the Firm London: SAGE Publications. Trimpop, R. M. (2012) The Psychology of Risk Taking Behaviour New York: McGraw Hill. Appendix 1 Structured Interview 1. Why do poor people in Nigeria choose to participate in lottery programmes rather than invest their money? 2. Why do rich people prefer to invest rather than engage in the lottery? 3. Do you think poor people who do not win the lottery after a long period of time might want to consider investments? 4. Is there a correlation between gambling addiction and poor peoples tendency to participate in the lottery? 5. In your view, what keeps poor people who fail to win hopeful that one day they will win? Appendix 2 Semi-Structured Interview 1. Some people say lotto and investment are the say. Do you agree? 2. Lotto and investment both promise returns and they both have inherent risks. The difference seem to be the extent of risks and rate of returns. Is that a valid view? 3. The game theory states that people are likely to take high risks where they have little or no chance and they take less risks when they have a better chance of attaining results. How does that relate to the psychology of lotto entrants in Nigeria? Appendix 3 How often do you participate in lottery games? A. Every Day of the week B. Twice a Week C. Once a Week D. Once a Month How often do you win the lottery? Once a year Twice a year Monthly I live on lottery Will you continue to stake lotto if you have a lot of money and assets? Definitely Yes Occasionally Maybe Never In your view, why do you continue to stake the lotto? I hope for a better future I seek some extra income I enjoy waiting and hoping for the results The adverts attract me I can afford it On the average, what proportion of your money do you spend on lottery each month Over 50% 30 – 50% 10 – 30% 0 – 10% I cant tell Read More
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