REGRESSION ANALYSIS ON NATIONAL INCOME

BY

ABAH RHODA UNUYO

MATRIC NO:

F/ND/19/3740044

SUBMITTED TO THE SCHOOL OF SCIENCE, DEPARTMENT OF STATISTICS

YABA COLLEGE OF TECHNOLOGY

SUPERVISED BY : MRS AGEBOYE

MARCH 2022

CERTYIFICATION
This project “REGRESSION ANALYSIS ON NATIONAL INCOME”. Was carried out by
AKINWANDE AKINNIYI PROSPER of Matriculation Number F/ND/19/3740044.

It has bee supervised, read and certified in the , DEPARTMENT OF STATISTICS YABA

COLLEGE OF TECHNOLOGY,YABA,LAGTOS.

________________________________ ________________________________

MRS AGEBOYE A.Y Date

Project Supervisor

________________________________ ________________________________

MR OKORAFOR, U Date
Project Coordinator

________________________________ ________________________________

MR LADAN, M.S. Date

Head of department
 DEDICATION
This project is dedicated to the almighty God for giving me the privilege and the ability to
be able to come up with an academic project.
I also dedicate this project to my family they have always been there for me. I also dedicate
this project to specially to my father Mr XXXXX Abah the one has been helping me
financially for my project without his support i will not come up with any project. I will not
fail to dedicate this project to mother Mr’s XXXXX Abah who has been there for me in times
of advice, May God continue to bless them all.Amen.
 ACKNOWLEDGMENT
My acknowledgement goes first to almighty God for his gudidance and protection over my life and for
his support trough out this program.
I also want to say a big thank you to my parents Mr and Mrs Abah for their motivation and financial
support throughout my national diploma program, may almighty God continue to bless you.
I will not fail to thank my siblings for being there for supports and encouragements.

ABSTRACT
this study is built on the multiple liner regression analysis, this study will be examining the
relationship of the variables which are: Gross domestic product (GDP) as dependent
variable Inflation variable(INF), and Exchange rates(EXH) in Nigeria with the amine of
testing the trend and dependency of the GDP on agricultural export and related variables.
Moreover this study will be applying multiple liner regression with the aid of ordinary least
square (OLS) method, correlation coefficient test, analysis of variance (ANOVA),line chats
and scattered diagram to examine the trend, this study will be applying the above methods
on a thirty(37) years data spaning from 1981 to 2010.Cnclusion shows that If the Nigeria
government really want to attain the objective of self-sufficiency in revenue generation
through domestic product, the government need to put in place policy and modalities that
will encourage existing banks (both commercial and agricultural banks) to make credit
facilities readily available to business within the economy with personnel assigned to
monitor and ensure that such funds are judiciously used for the purpose which it is taken.

TABLE OF CONTENT

Title page

CHAPTER 1

1.0 INTRODUCTION

1.1 Background to study

1.2 Problem statement

1.3 Study objectives

1.4 Research hypothesis

1.5 Justification of study

1.6 Definition of Terms

CHAPTER 2

2.0 LITERATURE REVIEW

2.1 Observation of Nigeria Economy

2.2 Theoretical framework

CHAPTER 3

3.0 MATERIALS AND METHODS

3.1 Sources of data collection

3.2 Variables adopted for analysis

3.3 Economic A prior

CHAPTER 4

4.0 RESULTS AND DISCUSSION

4.1 Data description and sources

4.2 OLS out puts

4.3 Charts and Graphs

4.4 Data analysis

CHAPTER 5

5.1 Conclusion and Recommendations

REFERENCES
 CHAPTER 1

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

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.

1.2 PROBLEM STATEMENT

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.

1.3STUDY OBJECTIVE

The study is designed to achieve the following objective:

 To examine the trend of the variables

 To determine the linear relationship between the variables

 To determine how reliable our regression coefficient is.

Also the study will be examining the direction and transmission channels of relationship

between countries economic growth and agricultural export within the range of 30 years.

1.4 RESEARCH HYPOTHESIS

This study will adopt statistical testing criteria to examine the veracity of hypothesis:

 H0: The independent variables have positive trend with economic growth in Nigeria.

H1: The independent variables have no positive trend with economic growth in

Nigeria.

 H0: The independent variables have significant relationship to the economic growth.

H1: The independent variables have no significant relationship to the economic

growth.
  H0: The independent variables have significant effect on the Nigeria’s Gross

Domestic Product.

H1: The independent variables have no significant effect on the Nigeria’s Gross

Domestic Product.

1.5 JUSTIFICATION FOR STUDY

The study is justified because it will help to know the status of Nigeria economy. The

knowledge of the status will help to make necessary recommendation in order to revitalize

the poor economic condition of the country for the better future. Furthermore the study Is

expected to serve as a reference material for further research as well as guide government

in its further policy designs towards achieving country wide expected goals.

1.6 DEFINITION OF TERMS

Gross Domestic Product (GDP): This is the sum of the money value of all locally produced
goods and services. It does not include international transaction. GDP does not make
allowance for depreciation of capital.

Gross National Product (GNP): This is the total money value of current market prices of all
final goods and services produced by the nationals during a specific period. It includes net
income from abroad in respect of the country’s nationals without any consideration for
depreciation of capital.

National Domestic Product (NDP): This is the total value of all goods and services
produced in a country in a period of time. It exclude the value of the net earnings and
incomes from abroad. An allowance being made for depreciation of capital.
Net National Product (NNP): This is the monetary value of all goods and services
produced within the country during a specific period. It includes net incomes and earning
from abroad and provision being made for the replacement of depreciation of capital.

Disposable Income (DPI): This is the amount of money per year that private sector are
free to spend when depreciation of capital, all taxes, all net profits made by firms but not
paid out as divided are added to the disposable and transfer payment subtracted. We
arrive at gross national product.

Net Economic Welfare (NEW): This examines those factors not considered when
calculating the Gross National Product (GNP). Such factors include social cost 9pollution)
and leisure time the net economic welfare tend to remove the product (GNP). A nation
might have a very high GNP at a very great social cost as pollution, rising crime etc.

Per Capita Income (PCI): This is the gross domestic product divided by the population of
the country. Per capita income can be calculated once the population and gross domestic
product are known. So that P.C.I = GDP
 CHAPTER 2

LITERATURE REVIEW
Galton (1886) first used the word “regression” in connection with predicting the
mature height of children from the height of their parents. Galton corrected for the sex
difference by multiplying all female height by 1.08, and he used a single predictor variable
taken to be the mean of the fathers, height ad corrected mothers height.

After some consideration of data, it becomes apparent that the height of children of
parents whose height exceeds average by x inches will themselves, on the average exceed
the average by less than x inches.

In other words, the children regress in average sense back to the mean. By gradual
metamorphoses, the term linear regression analysis came to mean the least square
prediction scheme and hence the term multiple regression came to mean the general case
with a multiple set of variable V1, V2, V3…… Vp-1 available as predictors.
 The history of the method as opposed to that of its common statistical name is quite
different. According to Gauss (1809) he first used the method in 1795 in a different context
and under the name “method of least squares’. Gauss did not publish his claim until 1809
and legendry had independently described the method in 1806.

According to Eisenhart (1963), the method arose as a natural extension of the

principle of averaging the results of several observation of the same quality to reduce
measurement error.

It is interesting that the basic computational ideas may be traced back to Gauss (1811) who
derived them in connection with least square analysis and illustrate them with the data
which he used to identify the orbit of the asteroid pallas from observations over the period
1803 – 1809.

In the exact sciences like astronomy, chemistry and physics, it is possible to

formulate laws connecting several quantities e.g density temperature and pressure of a gas,
so that anyone of these quantities can be determined (subject to small experimental errors)
from the others. In methodology, production is much less certain, but it is still possible to
forecast the weather with considerable success..

In living science like biology and agriculture there are so many unknown factors at
work that every different result may be obtained from what appear to be identical causes.

Even here, however, the law of average hold good. E.g fat men and women tend to
have fat children although the association is only partial.

The adult sons of men below average height will on the whole be nearer the average
height than their fathers e.g the sons of men 1.6m tall might, on the average, reach about
1.7m. It was this regression to the normal noticed by Sir Francis Galton in his research on
heredity that gave the “regression analysis” to this branch of statistics.
 While therefore, the son’s height cannot be deduced from the fathers it is possible
knowing the fathers height to make a better forecast of the sons height than simply taking
the average of the population.

Narrowing it down to the study, knowing the national income data fro few years and
making analysis on them can help to make a better forecast on the future state of the
economy.

2.1 OBSERVATION OF NIGERIA ECONOMY

We are convincingly aware about the low standard of living in Nigeria because our
per capita income is very low. We must consider how to raise our standard of living which
is basically the problem of raiding per-capita income. Simply all things must be done to see
that the GDPs for the possible by increasing the GDP and by controlling the population
growth.

Much has been said about population and its attendants. We only need to adhere
that in Nigeria the death rate fall while birth rate, increases, therefore population zooms
higher and higher without corresponding increase in the production of goods and services.
Consequently and with this awareness the government should timely encourage family
planning schemes.

Nigeria is firmly struggling to increase the GDPs. This is manifested in the various
budgets presented to the nation by her past leaders. Government is aware of the fact that
to increase the GDP means to increase the flow of goods and services to the consumers.
And that this could only be done by the joint effort of increasing the productivity efficiently
and increasing the quantities of the factors of production, make the existing factors
produce more.

Then increase the labor force and improve their skill by education, bring more of the
vacant lands under production and use more capital is to industrialize. Capital singularly
contributes more than any other that we lack seriously in Nigeria today.

This makes the rate of growth of the economics of Nigeria very low-below 6% which
is the UND’s poor Nations growth rates.

2.2 THEORETICAL FRAMEWORK

 The theoretical framework of this study is built on the multiple liner regression

analysis, this study will be examining the relationship of the variables which are: Gross

domestic product (GDP) as dependent variable Inflation variable (INF), and Exchange

rates(EXH) as independent variables in Nigeria with the amine of testing the trend and

dependency of the GDP on the independent variables.

Moreover this study will be applying multiple liner regression with the aid of ordinary

least square (OLS) method, correlation coefficient test, analysis of variance (ANOVA),line

chats and scattered diagram to examine the trend.

In conclusion, this study will be applying the above methods on a thirty(30) years data

spaning from 1981 to 2010 to achieve the above listed aims and objectives.
 CHAPTER 3

MATERIALS AND METHODS

This study adopts a non- experimental research design approach. The data ware

obtained from secondary sources and therefore, no sampling was done, neither was any

sampling techniques adopted in the process of research

3.1 Sources of data collection

The data for this study where secondary in nature and sourced from the National

burial of statistics (NBS) publications [ Central Bank of Nigeria (CBN) bulletins on economic

growth] , The data spans the period of 1981 to 2017 (37 years).

3.2 Variables adopted for the study

1 INF (Inflation variable) as the independent variable.

2 EXH ( Exchange rate as) the independent variable.

3 GDP (Gross domestic product) as the department variable

The variable adopted for the study is;

The Gross domestic product in the variable is used to indicate the economic status in the

country. While the INF and EXH is used to denote the increase or decrease economic

activities and it contribution to national income.

3.3Method of data analysis

The study made use of IMB SPSS 23, statistical software for the analysis.

The methods of data analysis include:

1 Ordinary least square (OLS): To examine the effect of the Inflation and Exchange rate

on the Nigerian national income using least square (OLS) techniques

2 Unit route test: To check the relationship and to .shows the precision of the regression

analysis.

3 Analysis of variance (ANOVA): for Analysis of Variance and it gives information about

the levels of variability within the regression model.

4 Scattered diagram and line chart: To examine the trends.

The model for this study is specified in both liner and non-liner relationship as follows:
The fictional form of the model is specified as follow;

1. The mathematical form of the model

GDP = f(INF,EXH)

2. The statistical form of the model

GDP = β0 + β1 (INF) + β2 (EXH) + Ut

Where;

GDP=Gross domestic product

INF=Inflation variable

EXH= Exchange rate

β0=Intercept

β1=Slope

Ut=Statistical error

ECNOMIC A PRIORI

A priori, it is expected that the independent variables (Inflation variable and Exchange

rate) should be positively related to the dependent variable (Gross domestic product), all

things being equal.

 CHAPTER 4

RESULTS AND DISCUSSION

4.1DATA DESCRIPTION AND SOURCES

This paper used secondary data (time series data). Regression analysis was carried out on

the basis of the sample covering the 1981 to 2010. Data from the database of Nigeria

statistical Bulletin (2010) respectively. The variables studied include GDP(Gross domestic

product) as dependent variable, Inflation variable(INF) and Exchange rate(EXH) as in

dependent variable. The table bellow is the data representation:

DATA ANALYSIS

Data presentation

YEAR GDP INF EXH

1981 139.31 20.81 0.61
1982 149.05 7.7 0.67
1983 158.75 23.21 0.72
1984 165.85 17.82 0.76
 1985 187.83 7.4 0.89
1986 198.12 13.7 2.02
1987 244.68 9.7 4.02
1988 315.62 61.2 4.54
1989 414.86 44.7 7.39
1990 494.64 3.6 8.04
1991 590.06 23 9.91
1992 906.03 48.8 17.3
1993 1,257.17 61.3 22.05
1994 1,768.79 76.8 21.89
1995 3,100.24 51.6 21.89
1996 4,086.07 14.3 21.89
1997 4,418.71 10.2 21.89
1998 4,805.16 11.9 21.89
1999 5,482.35 0.2 92.69
2000 7,062.75 14.5 102.11
2001 8,234.49 16.5 111.94
11,501.4
2002 5 12.2 120.97
13,556.9
2003 7 23.8 129.36
18,124.0
2004 6 10 133.5
23,121.8
2005 8 11.6 132.15
30,375.1
2006 8 8.5 128.65
34,675.9
2007 4 6.6 125.83
39,954.2
2008 1 15.1 118.57
43,461.4
2009 6 13.9 148.88
55,469.3
2010 5 11.8 150.3

Variables Entered/Removeda

Variables Variables
Model Entered Removed Method

1 EXH, INFb . Enter

a. Dependent Variable: GDP

b. All requested variables entered.

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .828a .686 .662 8892.293975277511000

a. Predictors: (Constant), EXH, INF

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 4659306069.817 2 2329653034.908 29.462 .000b

Residual 2134968087.854 27 79072892.143

Total 6794274157.671 29

a. Dependent Variable: GDP

b. Predictors: (Constant), EXH, INF

Coefficientsa
 Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -1173.179 3420.151 -.343 .734

INF -19.493 90.299 -.025 -.216 .831

EXH 215.250 30.248 .819 7.116 .000

a. Dependent Variable: GDP

LINE CHATS

GDP
140,000.00
120,000.00
100,000.00
80,000.00
GDP
60,000.00
40,000.00
20,000.00
0.00
8 1 98 4 98 7 90 0 992 995 998 001 004 007 01 0 01 3 01 6
19 1 1 1 1 1 1 2 2 2 2 2 2
 INF
90
80
70
60
50
INF
40
30
20
10
0
8 1 8 3 85 8 7 8 9 9 0 92 9 4 9 6 98 00 0 2 04 06 08 1 0 1 2 14 1 6
19 19 1 9 19 19 19 1 9 19 19 1 9 2 0 20 2 0 2 0 2 0 20 20 2 0 20

EXH
350
300
250
200
EXH
150
100
50
0
81 8 3 85 87 8 9 90 9 2 94 9 6 9 8 00 02 0 4 06 0 8 10 1 2 1 4 16
1 9 19 1 9 1 9 19 1 9 19 1 9 19 19 2 0 2 0 20 2 0 20 2 0 20 20 2 0

Interpretation

This chapter contains the results of data analysis. Data were analyzed using Charts and

Regression Analysis results tested at 0.05, level of significance are presented in the section. The

statistical package used is IMB SPSS 23(statistical software).

4.2 Summary Output:

Model R R Square Adjusted R Square Std. Error of observations

1 .828a .686 .662 8892.293975277511000

The results in Table above assessed fit of the regression model. The value of correlation

coefficient (R) is 0.828, which implies that there is a strong positive linear relationship between

Gross Domestic Product(GDP), Inflation variable(INF) and Exchange rate(EXH). In addition,

coefficient of determination revealed that INF and EXH explain 68.6% of the total variation in

GDP leaving the remaining 31.4% unexplained. The adjusted R Square is 66.2% indicating that

the cross validity of the model fit is good and standard. Standard error observed (SEO) is the

standard deviation of residuals, which indicates low estimation error, value of 8892.294 i.e. the

larger the value of R Square, the smaller the standard error of estimate.

4.3 Overall Test of Significance

ANOVA stands for Analysis of Variance and it gives information about the levels of variability

within the regression model.

Table 4.2

ANOVA

Model Sum of Squares Df Mean Square F Sig.

1 Regression 4659306069.817 2 2329653034.908 29.462 .000b

Residual 2134968087.854 27 79072892.143

Total 6794274157.671 29
The result in Table above tests the acceptability of the model from statistical perspectives. The

ANOVA table tell us whether the model overall results in a significantly good degree prediction

of the outcome variable. Hence, agriculture predicts the gross domestic product of the country

since the results were statistically significant, F(2, 27) = 29.462; p < .05; therefore the model

fits the data well.

4.4 Parameter Estimates

The parameter estimates are the regression coefficients i.e. estimate for b-values and these values

indicate contribution of predictor to the model.

The regression equation is;

Gross Domestic Product = -1173.179+-19.493 * Inflation RATE + 215.250 * Exchange rate

Table 4.3

Coefficientsa

Unstandardized Standardized

Coefficients Coefficients

Model B Std. Error Beta t Sig.

1
(Constant) -1173.179 3420.151 -.343 .734

INF -19.493 90.299 -.025 -.216 .831

 EXH 215.250 30.248 .819 7.116 .000

Interpretation of the fitted regression model

The model implies that inflation and exchange has a positive significant effect on Gross domestic

product. Hence, a unit increase a unit increase in Inflation variable would raise GDP by N

19.493Million,and a unit increase in Exchange rate would raise GDP by N 215.2504Million. In

addition, absence of agriculture inflation and exchange (i.e. if inflation and exchange is not

considered) indicates a reduction of N 1173.179million in the value of gross domestic product.

 CHAPTER 5

CONCLUSION AND RECOMMEDATON

The role of national income in any economy is indeed significant and cannot be over-

emphasized.It is one of the most dominant part of any economy as the very survival of

every nation depends on how well or bad its national income is managed. Production is

indeed not just a major source of livelihood for its citizens but a source of foreign exchange

earner to the nation. This is because apart from providing food for the teeming population

of the economy, it is the only source of raw materials that serves as input for other sectors

in their profit generation process. But the study analysis shows that there is progress on

the aspects of national income generated through GDP in Nigeria. The study also show that

there is a relatable increase in Gross domestic product and Exchange rate which indicate

the potential of production sector as a supporting Pillar of the nation’s national income

which implies economic growth.

The following is therefore recommended for policy implementation:

(a) If the Nigeria government really want to attain the objective of self-sufficiency in

revenue generation through domestic product, the government need to put in place policy

and modalities that will encourage existing banks (both commercial and agricultural

banks) to make credit facilities readily available to business within the economy with

personnel assigned to monitor and ensure that such funds are judiciously used for the

purpose which it is taken.

(b) Furthermore, government must provide funds to acquire sophisticated tools machines

and as well build facilities and establish processing industries across the country to enable

increase productivity, process, and preservation of goods and create policies that regulate

unlawful increase in price of commodities.

(c) Finally, government spending on both oil sector and non oil sector must of a necessity

be increased. Similarly, the present lackluster and uninspiring attitude of government to

management of appropriated funds must also change. Corrupt civil servants, contractors

and bureaucrats who divert and misappropriate allocated funds for the growth of the

sectors must be punished to serve as deterrent to other intending treasury looters. The

various financial crimes commissions such as EFCC and ICPC should be strengthened to do

this.
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https://goo.gl/ZSWyQU

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(2017) Vanguard Newspaper. Link: https://goo.gl/A5CRpN

5. Bishop, Y.M, Fienbery, S.F and Holland P.W (1975)

Discrete Multivariate Analysis: Theory and Practice, Cambridge, Mass MIY Press
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Analysis 2nd Edition; New York: Wiley.

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Chapman and Hall

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York: Wiley.

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Statistics 2nd Edition; Macdonald and Evans

10. Cox D.R. and Snell, E.J. (1981) Applied Statistics

Principles and Examples; London New York: Chapman and Hall.

11. Klemban and Kupper; Applied Regression Analysis and

Multivariable Methods.

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13.https://gjournals.org/GJAS/Publication/2020/1/HTML/01302015%20Taiga%20and

%20Ameji.htm

14. https://en.m.wikipedia.org/wiki/nationalincome_in_Nigeria

16. https://en.m.wikipedia.org/wiki/Economy_of_Nigeria
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ngr-agric-export.pdf&sa=U&ved=2ahUKEwj-

pOuW6fT0AhVHzqQKHXwPAmIQFXoECAIQAg&usg=AOvVaw20-N4vJoTYaXlB5Ocye-XX