Abstract
This research work is a regression analysis of National income of the federal republic of Nigeria from 1992 – 2011
It is aimed at fitting a prediction equation for gross national income over consumption expenditure, gross national income over time, to forecast the future national income and to test significant difference between government and private final consumption expenditures.
To achieve these, the methods of analysis employed are regression and correlation analysis and student t – test
It was observed that there is a strong positive relationship between gross national income and consumption expenditure.
In conclusion, the research reveals that there is an increase of gross national income over the years under study.
The student t – test reveal that the total government consumption expenditure is different from that of private consumption expenditure.
Based on all these findings, necessary recommendations were made.
TABLE OF CONTENTS
CHAPTER ONE
Introduction
Historical overview of central bank of Nigeria
Significance of the study
Aims and objectives of the research
Scope of the study
Definition of concepts
Survey methodology
Limitation of the research
CHAPTER TWO
Literature review
Nature and scope of econometrics
National income account
Public versus private expenditure
Source of data for the study
Economic growth
Review of the analysis used
Regression analysis
Correlation analysis
Test of difference of two means
CHAPTER THREE
Research methodology
Simple linear regression analysis
Regression equation
Simple correlation analysis
Test of difference of two means
CHAPTER FOUR
Summary of data
Data presentation
Data analysis
CHAPTER FIVE
Summary, conclusion and recommendations
Summary of findings
Conclusion
Recommendations
References
CHAPTER ONE
INTRODUCTION
National income is the sum of the money value of all the commodities and services produced in a country within a particular period of time usually one year.
The question of how an economy grows could come to mind at this juncture. It the amount of goods and services produced by an economy increases. If it does not increase yearly, it is not growing, even if it is growing, the rate of growth may not be uniform among years. Therefore it may not be possible to determine the condition of the economy.
In any case, an economy needs an indicator for measuring economy growth, this indicator is the monetary summation at all the commodities and service produced in an economy within a particular period of time usually a year.
To get national income of a country like Nigeria for instance, we take the list of the goods and services produced in the country during the year, assign values to them and add up. If we can do this year after year, we shall be able to make comparison of activities of Nigeria year after year. Then we can decisively determine whether the economy of Nigeria is growing, declining or stagnant. It is growing if the National income increases year after year, declining, if the National income is decreasing and stagnant it there is no difference in the National Income for years.
In measuring National Income, an indicator called Gross Domestic Product (GDP) is used at current price. It is therefore quite important here to point out the role that prices could play in the measurement of National Income. Prices of goods and services changes from time to time. These changes can affect any attempted estimates. Considerably. Therefore to get an idea of the real physical change in National Income from year to year, effect of price changes must be removed.
National Income should be measured in real terms and allow for changes in price levels. For instance whenever the economy experiences inflation, price rises while the quantities of goods and services may remain constant. Let us say that 2000, the total units of the go0ods and services realized in Nigeria amounted to 50,000 units and also 50,000 units in 2001. Let us further assume that the average per unit in 2000 was N10.00 while the price in 2001 was N15,000.
Nigeria’s income with GDP as an indicator for 2000 was 50,000 units X N10.00 = N5000,000 Nigeria’s income with GDP as an indicator for 2001 was 50,000 units X N15.00 = N750,000.
If the two figures were presented to a layman as final products of overall estimates for 2000 and 2001, he would be tempted to say that the National income for 2001 was higher than that of 2000. This is so monetarily but really the income for both year are equal. The difference in value was due to rise in p rice in 2001 while the quantities of goods and services were the same in both years.
The same thing can be applicable when a country experience deflation or depression. Therefore in measuring national income for different years using gross domestic product as an indicator effects of price changes must be given the normal due. In so doing the changes in economy can be determined appropriately.
STATEMENT OF PROBLEM/MOTIVATION
As a result of poor economic condition in Nigeria relevant information is of great interest to me for investigation if viable economic solution can be revealed.
Nigeria considered as one of the third world countries is been assessed by their income yearly. It is a simple logic of our living that it country’s income is high with considerable population, the enjoyment of the citizens of that country would be high, while the enjoyment is low with low national income. It is on this point that I find it very expedient to analyze the national income of Nigeria and make necessary recommendation for the improvement of the economy for the betterment of the citizenry.
Significance of the study
The role of finance in a developing country such as ours cannot be over emphasized. This is because finance is one of the major inhibiting factors in the transformation of our economy from the developing one to a modern industrialized society.
This study is carried out to aid the government in economic planning and to provide useful aids in judging achievement in economic growth through national income statistics.
Aims and objectives of the research.
1. To estimate the consumption expenditure functions over gross national income for the purpose of prediction.
2. To estimate the relationship that exists between consumption expenditure and gross national income.
3. Fitting a regression equation of gross national income over years for the purpose of prediction.
4. To forecast the future consumptions based on gross national income trend value.
5. To test if there is significant differences in averages of government final consumption expenditure and private consumption expenditure.
Scope of the study
The information used in this study is extracted from the central bank of Nigeria (cbn) financial and economic review of 1992 – 2011.
The study was to cover gross national income and consumption expenditure meant of the federal republic of Nigeria.
Basically, econometrics methods of analysis would be employed on the economic variables in evaluating their performances based on the information collected.
Definition of concepts.
Concepts and terms relating to evaluation of research study are:-
National income
This is the market value (total money value) of all final goods and services produced in an economy as well as the incomes generated by economic agents (buyers and sellers) over a period of time usually a year.
Consumption.
It is the sum of current expenditure on goods and services either by the private or government. Consumption is the ultimate objective of economic activities to create utility so as to satisfy human wants.
The private sector constitutes the largest component of national product. This is divided into three main categories
Namely; durable consumption expenditure includes expenditures on administrative and internal security, economic services, social and community services and transfer payments.
Survey methodology
The method of data collection employed in third study is purely secondary data collection.
All data were extracted from the CBN financial and economic review from 1992 – 2011 via the CBN website.
Limitation of the research.
Unlike the primary data where researcher knows the condition under which the data were collected and quite aware of any limitation they may contains, the reverse is the case in a secondary data. Users of secondary data cannot have through understanding of the background as the original investigator and so he is unaware of any limitation.
Though the data that would be presented by such a financial house as CBN could be said to be accurate. Such data items and information is usually cumbersome and climsy for easy analysis. Because their accuracy in estimation may be subjected to errors particularly the cross national income
The likely limitation may be when these data were collected and estimate from source. Which is still a primary business of the data.