An Evaluation of GDP as an Indicator of Economic Welfare in Nigeria
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Background of the Study
Gross Domestic Product (GDP) is widely used as a measure of economic activity; however, its adequacy as an indicator of economic welfare has been increasingly questioned. In Nigeria, GDP figures have traditionally been regarded as the primary benchmark for assessing economic performance. Yet, critics argue that GDP fails to capture essential elements of welfare such as income distribution, environmental sustainability, and social well‐being (Nwosu, 2023). Economic welfare encompasses not only the quantity of economic output but also the quality of life experienced by citizens. As such, relying solely on GDP can be misleading when assessing overall economic progress.
Recent debates in economic literature highlight that GDP growth may coincide with worsening social inequalities and environmental degradation, thereby challenging the notion that higher GDP automatically translates to improved welfare (Ibrahim, 2024). For instance, Nigeria’s economic expansion, fueled largely by its oil sector, has not necessarily resulted in equitable wealth distribution or significant improvements in living standards across the population. The limitations of GDP as a welfare indicator are further compounded by the exclusion of informal economic activities and non-market transactions, which are significant in many developing economies (Adesola, 2025).
The need to evaluate GDP critically as a measure of economic welfare is underscored by recent policy shifts towards inclusive growth and sustainable development. Policymakers are now faced with the challenge of reconciling the pursuit of economic growth with broader social objectives. This study aims to investigate the extent to which GDP reflects the economic welfare of Nigerians by comparing it with alternative indicators such as the Human Development Index (HDI), poverty rates, and measures of inequality. By integrating quantitative analysis with qualitative assessments of living standards, the research will offer a comprehensive evaluation of GDP’s effectiveness in capturing the real economic well‐being of the population (Nwankwo, 2024).
In this context, the study will explore both the theoretical underpinnings of GDP as a welfare measure and its practical implications in the Nigerian economy. It will consider the evolving global discourse on sustainable development and the role of alternative indicators in providing a more holistic picture of economic progress. The findings are expected to inform policy debates on the adequacy of GDP as a solitary measure of welfare and highlight the need for a multidimensional approach in economic assessments (Okoro, 2023).
Statement of the Problem
The reliance on GDP as the primary indicator of economic performance in Nigeria poses significant challenges for accurately assessing economic welfare. Although GDP provides a quantifiable measure of economic output, it fails to account for critical factors such as income inequality, environmental quality, and the overall standard of living. This narrow focus may lead policymakers to overlook essential dimensions of welfare that are vital for long-term sustainable development. Consequently, decisions based solely on GDP data might result in policies that prioritize short-term growth over long-term improvements in citizens’ quality of life (Nwosu, 2023).
Furthermore, Nigeria’s economic structure, which is heavily influenced by its oil-dependent economy, presents additional challenges in using GDP as a welfare metric. While oil revenues contribute significantly to GDP, they do not necessarily reflect improvements in social welfare or equitable distribution of wealth. The disconnect between GDP growth and real improvements in living standards has raised concerns among scholars and policymakers alike. For example, while nominal GDP figures may show impressive growth rates, the benefits of this growth often fail to reach the broader population due to persistent inequalities and regional imbalances (Ibrahim, 2024).
The central problem addressed in this study is whether GDP, as currently measured and interpreted, is a sufficient indicator of economic welfare in Nigeria. The research will investigate if alternative measures such as the HDI or income distribution indices provide a more accurate reflection of the economic realities on the ground. By analyzing recent data and examining case studies from various Nigerian states, the study aims to identify the limitations inherent in GDP-based assessments and to propose a more comprehensive framework for evaluating economic welfare. The ultimate goal is to inform policymakers about the need to incorporate broader welfare metrics into economic planning and development strategies, ensuring that growth translates into tangible improvements in the lives of Nigerian citizens (Adesola, 2025).
Objectives of the Study
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To evaluate the effectiveness of GDP as an indicator of economic welfare in Nigeria.
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To compare GDP with alternative welfare indicators such as HDI and income distribution indices.
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To propose a comprehensive framework for assessing economic welfare that complements GDP data.
Research Questions
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How accurately does GDP reflect the economic welfare of Nigerians?
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What are the limitations of using GDP as a sole indicator of welfare?
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How can alternative indicators enhance the assessment of economic well‐being?
Research Hypotheses
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GDP does not fully capture the multidimensional aspects of economic welfare in Nigeria.
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There is a significant discrepancy between GDP growth and improvements in key welfare indicators.
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A composite framework incorporating alternative welfare metrics provides a more accurate picture of economic well‐being.
Scope and Limitations of the Study
This study examines the relationship between GDP and economic welfare in Nigeria using data from 2020 to 2024. Limitations include data reliability and the inherent difficulty in quantifying non-market activities and social dimensions of welfare.
Definitions of Terms
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Economic Welfare: The overall well‐being of a population, including income, health, education, and living conditions.
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Human Development Index (HDI): A composite index measuring average achievement in key dimensions of human development.
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Income Distribution: The way in which a nation’s total income is spread among its population.
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