THE IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN NIGERIA (1981-2016)
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Abstract
The study examined the impact of human capital and physical capital on economic growth in Nigeria between 1981 and 2016. In specific terms, the study investigated the extent to which government expenditure on education and health and gross capital formation influenced economic growth in Nigeria. Human capital is instrumental in tackling poverty and unemployment, promotes economic growth, and equips the labour force with modern skills and competencies. Contemporary discussions on human capital and economic growth are dominated by three theories namely human capital theory, modernization theory and dependence theory.
The theoretical underpinning of the study is predicated on the augmented Solow growth model. The Solow growth model posits that national output (Y) is driven by technical progress (A), physical capital (K) and human capital (HL). Based on this, economic growth represented by real GDP was expressed as a function of gross capital formation (proxy as physical capital) and government expenditure on education and health were proxy as human capital. The ADF test revealed that all the variables except real GDP are stationary at level while real GDP is stationary at first difference. It was found that there is long-run relationship between economic growth, human capital and physical capital in Nigeria. Furthermore, the coefficient of ECM indicates that speed of adjustment from short-run to long-run equilibrium is 2% per annum. Government expenditure on education had a significant negative impact on economic growth in Nigeria. Government expenditure on health had an insignificant positive impact on economic growth in Nigeria while gross capital formation exerted non-robust positive effect on economic growth in Nigeria.
The study concluded that human capital and physical capital did not significantly improve the level of economic growth in Nigeria between 1981 and 2016 mainly because successive governments within these periods paid little or no attention to human capital development. The study suggested that; Efforts should be geared towards improving the standard of education in Nigeria. Substantial amount of government budgetary allocation should be directed to the educational sector; There should be establishments of special agencies with the responsibility of improving the skills and capabilities of human capital; An enabling environment of macroeconomic stability should be provided by the government to encourage investment in human capital by the private sector and government.
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