Principal Component Analysis of Nigerian Economy from 2006 – 2017

Abstract

The economy of a developing country like Nigeria depends mainly on crude oil exploration, currently other economic factors such as Agriculture, Industrialization, Manufacturing, other available mineral resources e.t.c., are not properly harnessed to improve the country’s GDP. A detailed study of the effect of ten economic factors of Nigeria’s economy was investigated and Principal Component Analysis was employed to explain the relationship, distribution and effect of the factors among the various sectors of Nigeria. It was discovered that a strong positive significant association existed between building and manufacturing, construction, wholesale and retail, transportation, communication, utilities, real estate and community social services, while a negative relationship existed between cruel oil and Agriculture. The component with the highest effect on the Nigerian economy was Agriculture, followed by crude oil and manufacturing/industrialization. The PCA has suggested retaining two components i.e. Agriculture and cruel oil. It was recommended that Nigeria Government should consider Agriculture first as the major economic factor before cruel oil and natural Gas.