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Impact of human capital on Nigeria economy

Impact of human capital on Nigeria economy



1.1 Background of the Study

Human capital is recognized as an agent of national development in all countries of the world. Providing education and health services to people is one of the major ways of improving the quality of human resources. Apart from being issues of social concern, both provide an economy with healthy trained human resources required for economic growth and development.

Human capital is all embracing, it is inclusive of persons who works now, or are likely to be productively employed sooner or later. It is a continuum, a continuing process from childhood to old age, and a must for any society or enterprise that wishes to survive under the complex challenges of a dynamic world (Okojie, 1995).

Human capital is so important that in the Khartoum Declaration of 1988, it was asserted that:

…the human dimension is the sine qua non of economic recovery…no SAPor

economic recovery programme should be formulated or can be implemented without having at its heart detailed social and human priorities. There can be no real structural adjustment or economic recovery in the absence of the human imperative (Adedeji et.al.,1990)

Todaro and Smith (2003 as cited in Noko, 2012) sees human capital as a term economists often use for education, health and other human capabilities that can raise productivity when increased. On the other hand, human capital development is the process and policies adopted by government/ firms to increase the stock of human capital of any nation, in their quest to achieve sustained economic growth and development.

Several theories have evolved to analyze the impact of human capital on economic growth, giving past government policies effort to the development of Nigeria human capital. The traditional theory of human capital postulates that as more investment is made on human capital development, it tends to increase the productivity of the workforce thereby increasing the economic growth at large. This was different from the view of the modern theory of human capital which argued that increase in human capital development will lead to a change in the personality and attributes of the labour force. Moses and Obikaonu (2002 cited in Noko, 2012) analyzing the complementary relationship between human capital and economic growth; noting that the highly educated such as the scientist and technicians appear to have a comparative advantage in understanding or adapting to new or existing ideas in production process. Uwath (2009) argues that, if any Nation; Nigeria inclusive is to experience rapid economic growth in the near future, it imperative that adequate steps be taken to improve the quality of education, health care, science and technology.

Prior to the Second World War (1939-1945), academic discourse on the relationship between education and economy was insignificant. However, later studies by Schultz (1961), Denison (1962) and a host other economists confirmed that the economy depended on education to foster economic growth.

Similarly, health is fundamental to economic growth and development and is one of the key determinants of economic performance both at the micro and macro levels. This derives from the fact that health is both a direct component of human well-being and a form of human capital that increases an individual’s capability (Bloom and Canning, 2003). Grossman (1972) has equally demonstrated that health is a form of human capital. Schultz (1992) argued that population quality is the decisive factor of production and emphasized the merits of investing in education and health (see also Bloom and Canning, 2000 and 2003).

Meeting the commendable United Nation health Millennium Development Goals (MDGs) of a reduction by two-thirds in the under-5 mortality ratio and a reduction by three-quarters in maternal mortality, and halting and beginning to reverse the spread of HIV/AIDS, malaria and other major diseases by 2015 will be completely elusive for Sub-Sahara African countries like Nigeria if sufficient attention is not paid to health expenditures. In the same vein, eradicating illiteracy as one of the objectives of the (MDGs) will be a concept if adequate attention is not given to educational expenditure by the federal government. It is against this backdrop that this paper examines the correlation between Expenditures on Education and Health Services, and Economic Growth in Nigeria.

Among other objectives, the paper focuses on public expenditures on the education and health sectors during the period under review with a view to ascertaining the relative commitments of the governments to these sectors.

1.2 Statement of the Problem

In Nigeria the high level of unemployed graduate & mass underemployment, 23.90% in 2012 (World Bank, 2013), which is manifested in low per capita income of Nigeria could be attributed to the neglect of the human capital development of the nation. Another issues of concern is, why should Nigeria be tagged a developing country in the face of such high number of universities, polytechnics, universities of science and technology and college of education that abound in the country? Nigeria is dominated by a good number of tertiary institutions characterized by poor infrastructural facilities and un-conducive environment for learning. No internet access, lack of Research and Development Centre’s (R&D), and regular industrial dispute disrupting the academic calendars.

Over the years government have develop policies to address the poor level of human capital development in the country, such as the “YOU WIN” programme which was develop to assist young female entrepreneurs with finance to carry their skill and area of interest, although this program and some other programs by government are there. Government are yet to fully integrate her human capital issue into the core policy frame work, this is manifested in Poor investment in human capital development in Nigeria which have led to a situation of mass unemployment in the country, low per capita income, poor standard of living which is the major concern of many policy makers and researcher all over the world.

However, in spite of the increased academic interest in the subject under discussion, several empirical studies have been carried on human capital development and economic growth relationships remain hitherto unsettled. Chief among these issues relate to the fact that the empirical linkage between human capital development and economic growth in Nigeria is yet unclear. This is because a good number of studies that have examined the influence of human capital development on the Nigeria’s economic growth have generated varying outcomes (Lawanson, 2009; Ogujiuba and Adeniyi, 2004).

Furthermore, while the study of the like of Noko (2012), establish a long run relationship between human capital development and economic growth in Nigeria, the impact of dis-aggregation of capital and recurrent expenditures on health and education respectively has not been sufficiently addressed by researchers. This study is therefore carried out to fill some of these gaps. It is designed to estimate the impact of human capital development on economic growth.

  • Research Question

In the course of carrying the research work, the research question to guide the researcher is given below.

  • To what extent does human capital development impact on the economic growth of Nigeria?
  • Is there any observed long-run relationship between human capital development and economic growth of Nigeria?
    • Objectives of Study

The objective of this study is to evaluate; the significant relationship between human capital development and economic growth. Specifically, the objectives of this study include, to;

  • Investigate the impact of human capital development on economic growth of Nigeria.
  • Examine the long-run relationship between human capital development and economic growth in Nigeria.

1.5       Statement of Hypothesis

H0: Human capital development has no significant impact on the economic growth of Nigeria.

H0: Human capital development has no significant long-run relationship with economic growth of Nigeria.

1.6 Significance of the Study

The impact of human capital development on the sustainable economic growth of any nation cannot be over-emphasized. This work will be of great importance to the general public, government and its agencies.

Also, it will be of great importance to the ministry of education, ministry of health as well as school administrators. Above all, it will be a foundation for economist, students and researchers who have interest on human capital.


1.7   Scope of the Study

This research aims to analyse the impact of human capital on Nigeria economy, taking a good analysis on various ways and means put by the government of Nigeria to enhance human capital since 1970-2012.

1.8 Limitation of the Study

The researcher encountered a number of constraints in the course of this work to include; data sourcing or data inconsistence due to poor nature of information management in Nigeria. Other constraints are; time factor, financial constraints and host of other constraints that prevent the researcher to present a better work than this.

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