Application of Multivariate Analysis on the Effects of World Development Indicators on GDP Per Capita of Nigeria (1981-2013)

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Author(s) Ekum M. I | Akinmoladun O. M | Aderele O. R | Esan O. A
Pages 524-534
Volume 4
Issue 12
Date December, 2015
Keywords Econometrics, Multiple Linear Regression, Ordinary Least Squares, Explanatory Variable, Dependent Variable.
Abstract

In this paper, we employ Multiple Linear Regression Model to fit a model of Gross Domestic Product Per Capita of Nigeria using some World Development Indicators (WDI) as explanatory variables. Data were collected from 1981 to 2013. The five WDI are OER-Official Exchange Rate (LCU Per US$, Period Average), BM-Broad Money (% of GDP), INF-Inflation, GDP deflator (Annual %), TNR-Total Natural Resources Rents (% of GDP) and FDI-Foreign Direct Investment, Net Inflows (% of GDP).At the end of the analysis it was discovered that the OER and BM are statically significant while INF, TNR and FDI are not statistically significant. The average estimated GDP per capita of Nigeria when the effect of OER, BM, INF, TNR and FDI are zero is $-360.81. Also, 1 unit increase in OER-Official Exchange Rate (LCU Per US$, Period Average) will lead to a significant increase in GDP per capita by $4.42 (4.42USD); if BM-Broad Money (% of GDP) increases by 1% then GDP per capita will increase by $25.17; if INF-Inflation, GDP deflator (Annual %) increases by 1% then GDP per capita will decrease by $0.08; if TNR-Total Natural Resources Rents (% of GDP) increases by 1% then GDP per capita will decrease by $0.63 and if FDI-Foreign Direct Investment, Net Inflows (% of GDP) increases by 1% then GDP per capita will increase by $13.52. (Note: All the estimated parameters are significant at 5% without exception). 71.1% of the total variation in GDP per capita of Nigeria can be explained by the variations in OER-Official Exchange Rate (LCU Per US$, Period Average), BM-Broad Money (% of GDP), INF-Inflation, GDP deflator (Annual %), TNR-Total Natural Resources Rents (% of GDP) and FDI-Foreign Direct Investment, Net Inflows (% of GDP) while the remaining 28.9% could be explained by other variables other than the ones used in this model.

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