Human Capital Development And Economic Growth; Evidence From Nigeria

Project and Seminar Material for Economics

Human Capital Development And Economic Growth; Evidence From Nigeria


The study examines the impact of Human Capital Development (HCD) Nigeria on Economic Growth in Its analysis is predicted on multivariate co integration where real GDP growth rate is the dependent variable while recurrent expenditure on education, real gross capital formation, primary enrolment; post primary education enrolment and tertiary education are independent variable.

It finds that capital formation; post primary education enrolment; tertiary education enrolment and recurrent expenditure on education promote economic growth in Nigeria.

The coefficient of tertiary institutions emanating from factors such as inadequate funding, weak infrastructure, incessant strike, and disruption in academic activities.

Government should appreciate the fact that no country can develop above is educational base.

Chapter One


1.1 Background to the Study

In the global terms, knowledge on all ramification of human endeavor, be it engineering, marketing, medicine and so on, is the pivot upon which the fulcrum of wisdom gravitate. This accounts for the differences in development on the private life and national life of individuals and the nations all over the world.

No country has achieved sustained economic development without substantial investment in human capital. Several studies have evolved to analyze the channel through which human capital can affect growth (Barro, et al, 1995; Temple, 1990).

However, human capital development has been described as an end or objective of development. It is a way to fulfill the potential of people by enlarging their capability and this necessarily implies empowerment of people, enabling them to participate actively in their own development.

Human capital is also a means since it enhances their skills, knowledge, productivity and intensiveness of people through a process of human capital development formation broadly conceived. Thus, human capital development is people centered strategy and not goods centered or production centered strategy of development. What truly matters is the empowerment of people to identify their own priorities and to implement programmes and projects of direct benefit to them.

The impact of social spending on economic growth is gaining prominence in the literature. It is becoming increasingly important to investigate the effect of good public health system andquantitative education on the economic growth of nations of the world.

Productivity has long been linked to both quality health care and good education. Basic education is critical to participation and productivity in economic life. A healthy labour forceincrease both the amount of growth realized from establishing a sound investment climate and strongly reinforce the poverty reduction benefits from that growth. This example ofeducation clearly shows that the two pillars of investment climate and development are closely connected to support each oilier.

Todaro (2000) states that education serves the dual purpose of increasing both empowerment and economic growth. In the first instance, education allows people to be more aware of theirresponsibility and their fundamental and qualified rights. It opens up an opportunity to know how to do things better.

This in turn not only increases individual income, it increases that of the nation and this economic growth aims to improving people’s life. However, it does not mean education provision, there is the better societies need to look carefully at the nature and allocation of education provision in relation to the needs and aspiration of the society. Education indicates knowledge and. skills which raise productivity, but it can also perpetuate social, inequalities impair values attitudes and aspirations that are not conducive to development.

Government expenditure lean toward teaching, hospital, tertiary e.t.c. Improvement in the could be either improving the income of the people so that they can obtain quality health care or improving the health care facilities. Increasing the income of the people to provide for themselves quality health care has been found to be tremendous benefit to the people of the third world countries e.g Nigeria. It has been potential positive impact on the national income of the nation.

1.2 Statement of the Study

In every country of the world, human capital development has been world one of the main factor of economic growth and development and it is known that there cannot be significant economic growth in the country without adequate human capital. In the past, mush of the planning in Nigeria was centered on the accumulation of physical capital for rapid growth and development, without recognition of the important role played by the human capital development process.

Infact a country’s most valuable assets are people and a defective incentive system can result in waste of human resources through human capital formation.

1.3 Objectives of the Study

Given the present state of manpower situation in Nigeria, the broad objective of the study is to examine the impact of human capital development on economic growth. Specifically, itaims at:

  1. Examining the role of capital formation on the country’s GDP.
  2. Ascertaining the effect of students enrollment on economic growth
  3. Finding the impact of current expenditure on education in real GDP growth rate.

1.5 Hypothesis

HO: There is no significant relationship between human capital development and economic growth in Nigeria

HA: There is significant relationship between human capital development and economic growth in Nigeria

1.6 Significance of the Study

Significantly, education and training contribute to workers stock of human capital – the knowledge and skill that make for a product {GDP) in Nigeria.

However, improvements in labour account for about two-thirds of the increases in real Gross Domestic Products (GDP). Improved technology, more capital, greater education and training, economies of scale, and better resources allocation will be the main contribution to Nigeria growth if policy options emanating from this study are implemented. More importantly, technological advancement is a critical engine of productivity growth and has accounted for the increase in output growth In Nigeria. Generally, technological advancement is generated from the discovery of new knowledge, which enables for resources to be combined in improves ways.

1.7 Scope / Limitations of the Study

The study covers the period; 1977-2006. The period coincides with the oil boom era,Pre-SAP, SAP and post SAP era, globalization period and era of economic reforms.

Limitation of Study
Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.6 Source of Data and Method of Analysis

This study adopts secondary data. It was sourced mainly from Central Bank of Nigeria (CBN) Statistical bulletin and Annual economic and Financial Report, and educational curriculum of the Federal Republic of Nigeria. The method of analysis for the study ismultivariate co-integration.

The research consists of five chapters, chapter one is the introduction, chapter two is the literature review, while chapter three is the structural background and methodology, chapter four is the presentation, analysis and interpretation of result while chapter five is the summary of finding, conclusion and recommendations.

1.7 Definition of Terms

The operational definition of this study includes

Human Capital Development:

This is defined as the process of acquisition of knowledge and utilized its in production process

Capital and Recurrent Expenditure:

This involves government long term or short term spending on directed towards the effective operations of various sectors in the economy.

Economic Growth:

This can be defined as an improvement in economic indicators of a country in this case the total output is used.

Chapter Five

Conclusion and Recommendations

5.1 Conclusion

Using the augmented Solow human-capital-growth model, this study empirically investigated the impact or effect of human capital development on the Nigeria economy. The Johansen 2 likelihood ratio test statistics, the trace and maximal eigenvalue cointegration test statistics reveals two cointegrating two cointegrating equations or vectors among the variables of interest. The regression estimates shows that all the independent variables – gross total capital formation, total stock of human capital and total government expenditure on education, are statistically significant in the determination of the level of the economy’s output. This implies that they cannot be ignored if we must achieve economic growth and development in Nigeria. Furthermore, the result indicates that all the independent variables, in line with theory, exhibit positive relationship with output level. This means that a greater amount of each would engender increase in output level or rise in the growth of the economy. Also, the regression result reveals that all the independent variables are relatively inelastic with respect to their relationship with the dependent variable.

5.2 Policy Recommendations

The following policy recommendations are made on the basis of findings of the present study as to how government can boost the economic growth of Nigeria through the positive contribution of human capital development:

  1. The Nigeria government should increase its total expenditure on education so that adequate educational facilities for thorough and proper quality education delivery would be made available.
  2. The Nigeria Government should ensure sufficient budgetary allocation on health expenditure in order to make proper health care facilities available to Nigeria citizens.
  3. The Nigerian government should ensure a standard is set across all secondary and tertiary institutions in the country so that proper human capital required for any individual to become productive is enhanced.
  4. The Nigeria government should make health care and education more accessible through improving its affordability to the common individual in society so as to boost the economic growth of Nigeria through human capital development.
  5. Government and policy makers should as a matter of urgency give high priority to human capital development. Concerted and sincere efforts should be made in building and developing human capacity through adequate educational funding across all levels since it remains the major way of attaining sustainable economic growth and development.

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