Why West African Countries have Lower National Income Figures than Developed Countries

The national income figures of West African countries are very small when compared with those of the developed countries of Western Europe and the United States of America. There are some reasons behind this situation and then include the following:

1. The Stage of Economic Development The state of economic development is very important in determining the size of national income. The countries of Western Europe and the United States are more developed and highly industrialised and therefore, have more national income than the countries of West Africa. 
2. Shortage of Capital Goods and Funds The relative shortage of capital goods and funds in West African compared with the highly developed countries accounts for lower than national income in West Africa. Capital is an important factor of production which can raise both productivity and national income in any country. 
3. Limited Exploitation of National Resources in West Africa Most of natural resources in West Africa as well as other developing countries are not fully exploited as in United States of America, Japan or Western Europe. As a result of this, some natural resources are lying idle in some of these countries which if fully exploited could have helped to raise the national income figures of such countries. 
4. Labour in West Africa is not Highly Skilled While many countries of West African have abundant supply of unskilled labour, some lack skilled labour. This situation leads to lower national income because skilled and well-trained man-power enjoys higher pay than unskilled man-power. But with the establishment of many secondary schools and insti- tutions of higher learning, reasonable proportion of West African labour force is now skilled. 
5.  Political Instability in West Africa Political instability which characterised West Africa for many years now does not create healthy cli- mate for foreign investments which are essential for increase in productive capacity and national in- come. The fear of nationalisation of foreign owned businesses discourages foreign investors in West Africa. 

The Uses of National Income Statistics

The use of national income statistic are not unique for any particular type of economy or any region. They are relevant to all countries both developed and undeveloped. Some of the uses of national income statistics are as follows

1. National Income Statistics are used for estimating per capital income of a country. They give us a summary of appropriate changes overtime in the per capital income and overcall standard of living. 
2. The national income statistics can give the structure of production at a glance, i.e. the items that make up the national income are clearly shown. This will help to know the combination of each sector in the economy to the national income of the country in question. 
3. National income statistics are useful in the formulation of fiscal policy. The figure of the previous year are compared with the current year and on the basis of this, a forecast on the state of the national economy is made for the coming year. 
4. The national income figures present the best method used in measuring economic growth. They show the progress made in each sector of the economy by giving the clear picture of the anticipated and realised rate of economic growth. 
5. The national income figures can be used in comparing the living standard in one country with that of another, especially when the countries are in the same level of economic development. 
6. National income figures can influence the decision of foreign investor, e.g. an investor may like to establish an industry where there is high per capital income as that will induce greater demand for the product of the industry. 

The Limitations of the Uses of National Income Statistics

1. For the domestic and international comparison, it is necessary to bear in mind that the standard of living is not merely measured by the amount of material goods available in the economy or even available to individual. There are other things that contribute to the standard of living of people in a country such as the health condition of the people; the amount of leisure time for the average worker, political and religious freedom. 
2. There are some unnecessary assumption that should not be allowed to exist e.g. if there is a 10% increase in the GNP of a country, there is always a tendency for people to think that the people’s well- being or standard of living has increased by the same percentage. Economic growth may occur but it may not lead to economic development of the country. 
3. Specialisation may lead to higher national income figure when actually there is no increase in the output of goods and services. Where there is no specialisation, people can do certain works for themselves and no payment can be made so as to include it in the national income calculation. But with specialisa- tion, it will be difficult for one to do some other things for himself rather he will empty the services of a specialist which will necessitate payment and inclusion in the national income figure. 
4. In developing countries, most of the agricultural products are consumed by the producers and as such their values are not known because they did not find their way to the market. In such a country, the national income figure, is seen to be very low where as in actuality is not so. The value of national income in such a country will be highly higher that what records show by the value of the amount of goods consumed by the producers. 
5. When comparing the changes in the standards of living, the average income per head. i.e. per capital income, may be a more valuable indicator than total national income. This is because the national income figure may rise but the population may rise more in the percentage, increase in population may be greater, making the per capital income to be lower and consequently the standard of living of people. 
6.  Finally, the basis of the statistics may vary from country to country. The proportion of goods and services not reaching the market is likely to be much greater in a developing country than in a developed country and again the transport expenditure in a place where there are no mass transit services will definitely be higher than in a country where there is highly developed mass transit facilities. These differences will make the use of national income figure for international comparison of the standard of living useless. 

Students Assessment Exercise 

1. Explain what you understand by the term national income. 
2. Distinguish between the gross domestic product and gross national product. 
3. Explain three major methods of measuring the national income of a country. 
4. Discuss in details the factors that determine the size of a country’s national income. 
5. Why is the national income figures of West African Countries far smaller than those of the developed countries of Western and the United States?
6. Discuss the uses of national income statistics. What are the limitations of the uses of national income statistics? 
7. Explain the reasons for measuring the growth trends in national income 
8.  Comment on this statement and discuss the view that the natural income does not provide the best single measure of a nation’s economic progress. 

 Conclusion

In the previous units, we learnt that the purpose of economic activity is the production of good and services and the output of a modern economy is an endless flow of such utilities. As the creation of both goods and services is counted as production by the economist then no distribution is made between the work of a farm labourer, a skilled physician a shop girl or a lorry driver. Thus a manufactured commodity is “produced’ in the economic sense at every stage of its journey from its basic ingredients to its sale across the counter. Pota- toes, wheat, fish, coal, natural gas, pig, iron sheet, steel, motor cars, tractors, roads, medical services and a million other items as well as a host of services are produced in Nigeria in any year. It would be possible with a great deal of effort to draw up an inventory of the goods and services produced in one actual year, but such a list would be of little economic significant as it would be so complex that comparison with earlier years or  other economic would be impossible. If all the good and services produced in a given year were reduced to their monetary value that they could be added to give the value of total output for that year, this is called the gross national product (GNP).

 This concept is one of the most important economic indicators and is fre- quently mentioned in parliament and the press. Its correct economic definition is the aggregate value of the goods and services produced during the year by the factors of production within the economy plus the net income from abroad. The GNP is more popularly known as the national income and it is occasionally called the national expenditure.

Therefore, the national income of a country is the record of all economic activities during the course of a year. In more specific terms, it is the market value of all goods and services produced in any economy during a particular year.

There are three ways of measuring the national income. These are

a) the product approach

(b) the income approach

(c) the expenditure approach

The expenditure have three approaches, they should normally give the same figure for national income;

There are a number of difficulties encountered in an attempt to measure the national income of a country.

Some of the problems are conceptual while other are practical resulting from the under developed nature of the economy.

1. The first problem is to decide on what to include in the calculation and what to exclude. 
2. A second difficulty with national income measurement rendered by consumer durable goods. 
3. Thirdly, there are some activities which produce goods and services and generate incomes but which are excluded in national income calculation because they are illegal. Good examples are armed robbery activities, gambling and prostitution. 
4. Fourthly, often inadequate information leads to errors in national income calculation. 
5. Fifthly, the way depreciation is treated constitutes another difficulty. 
6. Perhaps, the real difficulty in national income calculation is in the danger of double counting.
7. In the seventh place, there is the problem of owner-occupied houses, an accurate data collection is a 

difficult track, some production systems are subsistence, technical expertise for collecting, national
income data is lacking and this makes the publication fit an irregular affair and finally a significant
proportion of the Nigerian population are self-employed and they include traders and market women
who are illiterates. These people do not usually keep accounts of their businesses and this makes it
difficult to calculate their incomes.

The figures obtained from national income computations have a number of uses. The per capital income is sometimes used in comparing the standard of living of countries. The national income show the contribution made by various economy. National income estimates also enables economic plans to compare the perform- ance of the economy over the years. It is used in deciding how much revenue should go to particular states or regions, and also enables a country to contribute to international organisations like United Nations, IMFS, etc.

 Summary

In this unit, we have succeeded in looking at the national income, i.e. the total income of a nation, the measurement of the national income of many nation, the problems encountered in the measurement of national income as well as the uses of national income statistics.