THE IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN NIGERIA (1981-2016)
ABSTRACT
Between 1981 and 2016, the study looked at the impact of human capital and physical capital on economic growth in Nigeria. The study specifically investigated the extent to which government spending on education and health, as well as gross capital formation, influenced economic growth in Nigeria. Human capital is important in combating poverty and unemployment, promoting economic growth, and providing workers with modern skills and competencies. Human capital theory, modernization theory, and dependence theory dominate contemporary discussions on human capital and economic growth.
The study’s theoretical foundation is based on the augmented Solow growth model. According to the Solow growth model, national output (Y) is driven by technical progress (A), physical capital (K), and human capital (HL). Based on this, real GDP was expressed as a function of gross capital formation (a proxy for physical capital), and government spending on education and health was a proxy for human capital. The ADF test revealed that, with the exception of real GDP, all variables are stationary at level, while real GDP is stationary at first difference. In Nigeria, it was discovered that there is a long-run relationship between economic growth, human capital, and physical capital. Furthermore, the ECM coefficient indicates that the annual rate of adjustment from short-run to long-run equilibrium is 2%. Government spending on education has had a significant negative impact on Nigeria’s economic growth. Government spending on health had a negligible positive impact on Nigerian economic growth, whereas gross capital formation
Formation had a marginally positive impact on Nigeria’s economic growth.
The study concluded that human capital and physical capital did not significantly improve the level of economic growth in Nigeria between 1981 and 2016, owing to successive governments paying little or no attention to human capital development during these periods. According to the study, efforts should be directed toward improving the standard of education in Nigeria. A significant amount of government budgetary allocation should be directed to the educational sector; special agencies with the responsibility of improving human capital’s skills and capabilities should be established; and the government should provide an enabling environment of macroeconomic stability to encourage investment in human capital by the private sector and government.
1.2 Statement of the Problem
The overall rate of development in any country is always constrained by a scarcity of productive factors. Capital is a scarce factor associated with underdevelopment that is frequently highlighted in development programming. The assumption is that growth is dependent on capital accumulation, and that more capital will either promote or facilitate faster economic development.
Various scholars have confirmed the importance of human capital in economic growth over time. Human capital is regarded as the most valuable asset and must be utilized (Awopegba, 2003). As an economic term, human capital includes health, education, and other human capacities that can increase productivity (Todaro and Smith, 2003). Capital and natural resources are passive production factors, whereas human resources are active production factors.
production. Human capital is a country’s most valuable resource; in its absence, physical capital (tools, machinery, and equipment) will not perform, stifling economic growth (Harbison, 1964).
Human capital includes education, health, on-the-job training, and skills gained through interactions between people or societies. In a more technical sense, human capital is defined as the accumulation of innate abilities as well as knowledge and skills that people acquire and develop throughout their lives. Human capital has been around for at least two centuries as an economic concept, but its incorporation into the mainstream of economic analysis and research is a new and exciting development. The need for this advancement became clear in the 1950s, when the application of empirical economics became popular.
Research into economic growth and income distribution concerns revealed major flaws not only in our understanding of each but also in our way of thinking about these issues.
Human capital is recognized as a driver of national development in every country on the planet. One of the most important ways to improve the quality of human resources is to provide education and health services to people. Aside from being social issues, both provide an economy with the healthy, trained human resources needed for economic growth and development.
The main issue with human capital is a lack of funding. This has resulted in a shortage of skilled personnel, unemployment, and, most importantly, poverty. Without adequate investment in infrastructure, no country can achieve significant growth.
Human capital. A typical example is the Asian tigers, Taiwan and Singapore, whose economies improved dramatically as a result of significant investment in human capital.
Human capital investment is critical to the Nigerian economy’s growth.
Taking a look at Vision 20:2020, which aims to improve the educational system in terms of access, equity, infrastructure, teacher quality, cumulative relevance, funding, and planning. Human capital is also emphasized in the Millennium Development Goals (MDGs), which are set to be fully realized in 2015. As a result, this research will delve deeply into the role of health and education in Nigeria’s growth process. To that end, the purpose of this study is to explain and identify some issues concerning human capital and economic growth in Nigeria. Building on previous research projects
and research, this research aims to deepen our understanding and expose us to more facts in terms of the benefits and economic advantages that citizens will reap if the government chooses the right and effective policies in developing human capital that will promote economic growth and development.
The overarching goal of this research is to assess and analyze the impact of human capital investment on economic growth in Nigeria. In line with this broad goal, the specific goals are to determine the relationship between education, health, and economic growth in Nigeria.
1.3 Objective of the Study
The overarching goal of this research is to assess and evaluate the positive impact of human capital development and physical capital development on Nigerian economic growth. More specifically, the study aims to:
To investigate the impact of government education spending on Nigerian economic growth.
To investigate the impact of government health spending on Nigerian economic growth.
To assess the impact of gross capital formation on Nigerian economic growth.
1.4 Research Questions
The study addresses the following research questions in an attempt to achieve the stated objectives:
I. To what extent has government spending on education influenced Nigeria’s economic growth?
II. To what extent has government spending on health affected Nigeria’s economic growth?
III. To what extent has gross capital formation influenced Nigerian economic growth?
1.5 Research Hypotheses
This investigation will put to the test the following hypotheses, as denoted by the null hypothesis: (Ho)
H0: Government spending on education has no significant impact on Nigeria’s economic growth.
H0: Government spending on health has no discernible impact on Nigeria’s economic growth.
H0: Gross capital formation has no significant impact on Nigerian economic growth.
1.6 Significance of the Study
The purpose of this research is to assess the effect or impact of human capital development on economic growth in Nigeria. This would aid understanding and appreciation of how human capital development affects economic growth. Individually, this research would help people understand and appreciate the importance of developing human capital in order to achieve economic growth. It would provide a framework for policy formulation and implementation for the government.
The research work will serve as a stimulus to other researchers’ thesis for future study and knowledge.
1.7 Scope of the Study
The study looked at the impact of human capital and physical capital on Nigerian economic growth. The study was conducted over a 36-year period, from 1981 to 2016. Because it spans the pre- and post-deregulation eras, the time frame is thought to be appropriate for the study.
1.8 Justification for the study
The human capital industry has little effect on economic development, which explains why the country’s human capital is poor. To justify this, we will explain why human capital is low and how to raise the level of human capital.
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