STUDY AND IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA-2010Q1 – 2024Q2

IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA-2010Q1 – 2024Q2

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IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA-2010Q1 – 2024Q2

Abstract

This study examines the Impact of Human Capital Development on Economic Growth in Nigeria from the first quarter of 2010 to the second quarter of 2024. Human capital development—encompassing education, health, and skill acquisition—has long been recognized as a critical driver of sustainable economic growth. Using quarterly time-series data sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and World Bank databases, this research analyzes the relationship between key indicators of human capital development (such as government expenditure on education and health, school enrollment rates, and life expectancy) and Nigeria’s gross domestic product (GDP). The study employs multiple regression analysis and the Autoregressive Distributed Lag (ARDL) model to evaluate both short-run and long-run dynamics between the variables.

Findings reveal a statistically significant and positive relationship between human capital development and economic growth in Nigeria. Specifically, increased investment in education and health infrastructure showed strong positive correlations with GDP growth. However, the study also identifies inefficiencies in resource allocation and institutional weaknesses that limit the full impact of human capital investment on economic performance.

The study concludes that while human capital development plays a vital role in promoting economic growth, sustained policy commitment, enhanced institutional frameworks, and efficient implementation strategies are required to fully harness its benefits. Recommendations include increased budgetary allocation to the education and health sectors, the implementation of skill-focused vocational training programs, and stronger monitoring and evaluation mechanisms for government human capital development initiatives.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Human capital development has become a cornerstone for achieving sustainable economic growth in both developed and developing nations. It encompasses the process of improving the knowledge, skills, health, and capacities of people to enhance their productivity and contribute meaningfully to the economy (Schultz, 1961). In the Nigerian context, investment in human capital—especially in the areas of education and health—is crucial for addressing issues of poverty, unemployment, and underdevelopment, which continue to challenge the country’s economic growth (Okojie, 2009).

The classical and neoclassical theories of economic growth have long recognized the importance of capital accumulation, including human capital, in fostering growth and development (Romer, 1990). Nigeria, with a population exceeding 200 million, has a significant demographic advantage. However, the inability to adequately invest in and manage its human capital has undermined the potential benefits of this demographic dividend (Adebayo & Ogunrinola, 2006). Despite several policy initiatives such as the Universal Basic Education Programme and the National Health Policy, the nation continues to experience poor educational outcomes, low life expectancy, and widespread underemployment.

Between 2010Q1 and 2024Q2, Nigeria has witnessed fluctuating economic growth rates, impacted by factors such as global oil prices, insecurity, policy inconsistencies, and weak institutional frameworks. Against this backdrop, human capital development remains a potentially powerful tool for diversifying the economy and promoting long-term growth (World Bank, 2023). Understanding the empirical relationship between human capital investment and economic growth over this period is, therefore, vital for evidence-based policy formulation.

1.2 Statement of the Problem

Despite the theoretical and empirical evidence supporting the positive impact of human capital development on economic growth, Nigeria continues to underperform in key human capital indicators. Government expenditure on education and health as a percentage of GDP remains low compared to global standards (UNESCO, 2022). This has led to challenges such as brain drain, poor labor productivity, low innovation levels, and a weak knowledge economy (Akinyemi et al., 2011).

Additionally, there is a lack of consistency in measuring the real impact of human capital investments on Nigeria’s GDP growth across time. The interplay between human capital indicators and economic growth in Nigeria remains underexplored, especially using recent data post-2010, which includes important economic shocks such as the 2016 recession and the COVID-19 pandemic. This study seeks to bridge this gap by analyzing the relationship between human capital development and economic growth in Nigeria from 2010Q1 to 2024Q2.

1.3 Objectives of the Study

The broad objective of this study is to evaluate the impact of human capital development on economic growth in Nigeria from 2010Q1 to 2024Q2.

The specific objectives are to:

Examine the effect of government expenditure on education on Nigeria’s economic growth.

Investigate the impact of government expenditure on health on Nigeria’s economic growth.

Analyze the relationship between labor force quality (education level, skill acquisition) and GDP growth.

Assess the short-run and long-run impacts of human capital development on economic growth using the ARDL model.

1.4 Research Questions

The study seeks to answer the following questions:

What is the effect of government expenditure on education on economic growth in Nigeria?

How does health sector investment influence economic growth?

To what extent does labor force quality impact GDP growth?

What are the short-run and long-run effects of human capital development on economic growth in Nigeria?

1.5 Research Hypotheses

The study will test the following null hypotheses:

H₀₁: Government expenditure on education has no significant impact on economic growth in Nigeria.

H₀₂: Government expenditure on health has no significant impact on economic growth in Nigeria.

H₀₃: Labor force quality has no significant relationship with GDP growth in Nigeria.

H₀₄: There is no long-run relationship between human capital development and economic growth in Nigeria.

1.6 Significance of the Study

This study is significant for multiple stakeholders including policymakers, development planners, researchers, and international agencies. For policymakers, it provides empirical evidence to support targeted investment in human capital for inclusive economic development. Development institutions and donors can use the insights to guide funding and technical support, while researchers may find the findings valuable for academic and applied research on economic development.

1.7 Scope of the Study

The study covers the period from the first quarter of 2010 to the second quarter of 2024. It focuses on human capital development indicators such as government expenditure on education and health, school enrollment rates, and labor force quality. Economic growth is measured primarily by changes in Gross Domestic Product (GDP). Data is sourced from CBN, NBS, World Bank, and other relevant sources.

1.8 Operational Definition of Terms

Human Capital Development: The process of acquiring and increasing the number of persons who have the skills, education, and experience critical for economic development.

Economic Growth: An increase in a country’s productive capacity, typically measured by the rate of change in real GDP.

Government Expenditure on Education/Health: The amount of public funds allocated annually to the education and health sectors.

Labor Force Quality: The aggregate skill level, educational attainment, and productivity capacity of a country’s workforce.

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