what's the difference between gross domestic product and gross national product. what is the significance of this distinction for Nigeria
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Answer: Gross Domestic Product (GDP) and Gross National Product (GNP) are both measures of economic performance but focus on different aspects of the economy.
GDP is the total value of all goods and services produced within a country's borders in a specific time period (usually a year or a quarter). It includes the production from both domestic and foreign-owned companies, as long as they are located within the country.
GNP, on the other hand, is the total value of all goods and services produced by the residents of a country, regardless of where they live and produce these goods and services. So, it includes the value of goods and services produced by the nationals of a country both domestically and abroad but excludes the value of the production by non-residents within the country.
For Nigeria, the distinction between GDP and GNP is significant for a few reasons:
1. Foreign Investment: Nigeria receives substantial foreign investment in industries such as oil and gas. These investments contribute to the GDP as they are located within Nigeria's borders. However, the profits from these investments may be repatriated abroad to the foreign owners, and thus would not be included in Nigeria's GNP.
2. Overseas Workers: Many Nigerians work abroad, and the income they send back home represents a form of economic production that benefits the Nigerian nation. These remittances would not be included in Nigeria's GDP but would be part of the GNP.
3. Economic Policy: Understanding how GDP and GNP differ can influence economic policies. A country with a large difference between GDP and GNP might focus more on policies that benefit national companies and citizens to ensure that economic growth is reflected in the benefits accruing to its citizens.
4. Economic Health: If there is a large discrepancy between GDP and GNP, it may indicate that the economic activities within the country are not significantly improving the wealth of its residents, which can have long-term implications for economic health and development.