A Time Domain Approach to Modeling Nigeria’s Gross Domestic Product

Original Research Article This study examined the contribution of the various sectors to the Gross Domestic Product (GDP) of Nigeria and also developed a model for forecasting the Gross Domestic Product of Nigeria within a time frame of 33 years. Data emanating from Central Bank of Nigeria was used and analyzed using regression analysis and time series analysis. The regression results shows that the three sectors; Agricultural sector, Industrial sector and Service sector has a positive relationship and only the Industrial sector and the Service sector contribute significantly with a coefficient of 0.286, 0.631 while the contribution of the Agricultural sector is not significant with a coefficient of -0.039 implying that service sector contributes the most with 631 million naira followed by the industrial sector with 286 million naira while the agricultural sector does not contribute significantly since it decreases by 39 million naira. The contribution of the agricultural sector is not significant. A time domain model (fundamental approach) which makes use of Box Jenkins approach was applied to a developing country like Nigeria to forecast Gross domestic Product for the period 1987 to 2019 using ARIMA model. The result reveals that there is an upward trend and the First difference of the series was stationary, meaning that the series was I (1). Using expert modeler, the best model that explains the series was found to be ARIMA (1, 1, 0). The diagnosis on such model was confirmed, the error was white noise, presence of no serial correlation and a forecast for period of 10 years terms was made which indicates that GDP will continue to appreciate with these forecasted time period. Copyright © 2021 The Author(s): This is an open-access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY-NC 4.0) which permits unrestricted use, distribution, and reproduction in any medium for non-commercial use provided the original author and source are credited. INTRODUCTION The development of the Nigerian Economy is one that emanated from a monoculture economy beign based purely on the agricultural sector of the economy, therefore making the sector the main stay of the economy. The discovery of the crude oil in (1956) in commercial quantity has however nullified this assertion, since it has relegated the hitherto mainstay of the economy to the background [1-4]. This makes it rely solely on the fortunes accuring from the proceeds of oil sector for the growth and development of the Nigerian economy. It is however important to note that the various sectors of any economy has a contribution to the development of that economy, this is to say that no matter how small the contribution of any sector, to the national income of that economy, it add up to the aggregate income of the economy and thus contributing directly or indirectly to the gross domestic earning of such economy. The Gross Domestic Product (GDP) is a basic measure of a country’s overall economic performance. It is the market value of all final goods and services made within the border of a country in a year and are often positively correlated with the standard of living. GDP is the most frequently used indicator of economic activity and is most often measured annually or quarterly to gauge the growth of a country’s economy between one period and another. A country is said to have good economy if its GDP is relatively high [5-7]. GDP is important in determining if an economy is growing quickly or slowly than the same quarter the year before, it is used to compare the size of economics that is relative growth rate of economies throughout the world. Also for investors, the GDP is used as a means of adjusting their assets location and to decide where the best opportunities lie. The Gross Domestic Product (GDP) of Nigeria is made up of diverse sectors which includes; Agriculture, Industry, Services, etc. Agriculture is one of the dominant sectors of the Nigerian economy. Though Guobadia Emwinloghosa Kenneth., Sch J Phys Math Stat, Jan, 2021; 8(1): 19-28 © 2021 Scholars Journal of Physics, Mathematics and Statistics | Published by SAS Publishers, India 20 since independence, its role in the economy has been on the downward trend especially its contribution to GDP. The sector comprises of crops, livestock, fishing and forestry. It involves the cultivation of land, raising and rearing of animal for the purpose of production of food for man, feed for animals and raw materials for industries. It is essential for the expansion of employment opportunities, reducing poverty and improvement of income contribution for speedy industrialization. The service sector has been increasing in major activities of the economy. The service sector comprises of transport, communication, utilities, hotel and restaurant, insurance etc. The service sector has major contribution in value added and gross fixed capital formation in Nigeria. It is an important source of revenue for the nation. Employment share in service sector is increasing, people are moving from other economic sectors to service sector. Industrialization is an integral part of development and structural change in any nation. The industrial sector comprises of the crude petroleum and natural gas, solid mineral and the manufacturing industries. History recorded that the industrial sector performance in Nigeria’s economic growth is as old as the nation itself. It dates back to the amalgamation of the southern parts of the country in 1914 for the geographical land mass called Nigeria. A number of fiscal and monetary policies together with institutional reform measures have been undertaken since independence. Right from the first national development plan (1962-1968) to the fourth national development plan (1981-1985) rapid industrialization received priority in Nigeria’s development objectives. These measures continued in May 1999 under the Olusegun Obasanjo administration. It is envisioned that Nigeria will be transformed into a major industrialized nation and an economic power [8, 9]. The Knowledge of the economic performance is of great importance to every nation. The pattern of GDP growth is held to indicate the success or failure of economic policy and to determine whether an economy is in recession. How different economic sectors contribute to the GDP growth, and how allocation should be distributed among the various sectors in Nigeria is of importance to the nation. Also whether the GDP growth is appreciating or depreciating in the nearest future is also of importance to the nation. This research work explores the contribution of three major economic sectors (building and construction, industry and service sector) on the gross domestic product in Nigeria. Also a forecast on how GDP could contribute to the economy in the nearest future is analyzed [1015]. METHODOLOGY Here we are going to present the data for this work and explain the methodology used in the analysis the data. The data used for this study is a secondary data collected from CBN statistical bulletin on gross domestic product of some economic sectors; agriculture, industry and services at 1990 constant basic prices (N’ Billion). The data is limited to thirty-three years from 1987-2019. Table-1: GDP and its various Sectors YEAR Industrial sector service sector Agricultural sector GDP 1987 89.45 34.50 84.43 251.05 1988 83.61 33.84 86.49 246.73 1989 72.26 31.63 85.28 230.38 1990 78.15 30.65 80.98 227.25 1991 28.04 39.36 26.77 253.01 1992 83.09 29.28 28.04 257.78 1993 81.83 30.14 39.36 256.0