Per capita income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area’s total income by its total popSulation.
To understand how per capita income is calculated, one first needs to understand how income of a country is calculated. Below is an illustration, using Nigeria.
In year 2015, the amount of goods and services produced by Nigeria, and their market prices are as followings.
Product/Service Amount Price per unit Total Price(Naira)
Crude oil 10000(barrels) N20 N200,000
Cocoa 5000 N10 N50,000
Textiles 2000 N5 N10,000
The Naira value of the total production (of goods and services) in year 2015 for Nigeria is N260,000.
This is the GDP (Gross Domestic Product) of Nigeria in 2015.
Let’s assume that the population of Nigeria in 2015 is 1,000.
Then, GDP per capita for Nigeria is N260,000/1000 = N260.
It means that, on average, a citizen of Nigeria in 2015 enjoyed N260 value of goods and services.
In reality, Nigeria’s GDP per capita calculation will contain more products and services, but this gives a little insight into how it is calculated.
What Does the Per Capita Income Depict?
Changes in per capita income reflect economic growth and help provide an insight into the well- being of citizens in a country. Low per capita income may indicate that the economy does not adequately support individuals and families.