The study examines Human capital development and economic growth in Nigeria. A model was specified and data were collected from the period of 1986-2016. The method used in this research work is the error correction model (ECM) and variables are: real gross domestic product (RGDP) as the dependent variable while human capital development (LNHMC), labour force productivity (LNLFP), money supply (MS), and population (POP) are the independent variables and while only labour force productivity (LNLFP) was significant, human capital development (LNHMC), money supply (MS) and population (POP) were all insignificant. From the ECM result, the following findings were made The estimate coefficients which are -0.058166 {LNHMC} shows that a 1 percent increase in human capital development will cause 5.9 percent decrease in GDP, 1.168297 {LNLFP} shows that a 1 percent increase in labour force productivity will cause an 116.8 per cent increase in GDP, 0.001167 {MS} shows that a 1 percent increase in money supply will cause 0.1 percent increase in GDP. 0.217250 {POP} shows that a 1 percent increase in population will cause 21.7 percent increase in GDP. I recommend that there should be policies





1.1       Background to the Study

Education and health are basic objectives of development; they are important ends in themselves. Health is central to well-being, and education is essential for a satisfying and rewarding life; both are fundamental to the broader notion of expanded human capabilities that lie at the heart of the meaning of development (Todaro and Smith, 2011).

No country has achieved sustained economic development without substantial investment in human capital. The role and importance of human capital in propelling the pace of economic growth cannot be overemphasized. The development of human capital has been recognized by economists to be a key prerequisite for a country’s socioeconomic and political transformation. Therefore, human capital is considered as the most valuable asset and needs to be mobilized, developed and empowered to participate fully in all socio-economic activities. To do this, it is first of all required that the stock and mix of human capital in the country be assessed based on the outcome of this assessment, plans are put in place to develop the required manpower to fill the existing gaps while provisions are made for future needs.

It was opined by Adedeji and Bamidele (2003) that the generally agreed causal factors responsible for the impressive performance of the economy of most of the developed and the newly industrializing countries is an impressive commitment to human capital formation. This has been largely achieved through education and training by all the people of these countries. It is important to know that human capital, which gained reasonable attention, started with seminar papers two decades of the last century. It has refined to highlight its endogenous contributions to the growth process (Romer, 1996, 1990; Lucas, 1998). Therefore, all developing countries were advised to invest in human capital formation of which Nigeria also participated. Nigerian government did not only start training people in schools, but formulated educational policies in relation to primary, secondary and tertiary institutions towards making education workable in Nigeria. Nigeria has come a long way in her development planning efforts. A major component of the development planning process is the effect in human capacity building through education and training.

It has been stressed that the differences in the level of socio economic development across nations is attributed not so much to natural resources and endowments and the stock of physical capital but to the quality and quantity of human resources. According to Oladeji and Adebayo (1996), human capital resources are a critical variable in an economy growth process and worthy of development. They are not only means but, more importantly, the ends that must be saved to achieve economic growth and progress.

Nigeria has been involved in planning to develop the country since her independence. But the strategy has been emphasizing heavily on the accumulation of physical or material capital to the detriment of human capital in the quest for rapid socio-economic progress. However, previous development strategies which virtually ignored the social or human aspect of development did little to alleviate the pace of development in the country. However, since 1990 when the United Nations Development (UNDP) started publishing the human development report year after year, the human development pathway to development began to gain grounds in many countries including Nigeria. The 1999 UNDP human development report on Nigeria highlighted the over arching problem of poverty in the country. The report noted that no meaning policies or programme for the alleviation of poverty can be successfully developed in the country outside the framework of a holistic sustainable human development paradigm (UNDP,1999). The federal government of Nigeria, perhaps in response to the 1999 UNDP report on the country, seems to have now embraced the philosophy of human development strategy as evidenced in its declare guiding principles in the 1999-2003 economic policy document “the economy exists for and belong to the people and at all times the general well-being of all people shall be the over-riding objectives of the effort”.

The 2016 Human Development Index (HDI), values for Nigeria was 0.423 placing her in the 152nd position among 188 countries with comparative data, whereas Ghana  while  Zambia, South Africa among others are placed above her. In three broad categories of; high, medium and low human development, Nigeria was grouped among the countries considered to have low human development (UNDP, 2016).

According to a World Bank Report of 1996 titled, “Nigeria, poverty in the midst of plenty” Nigeria presents a paradox, the nation itself is rich but is inhabited by poor people. Human capital in Nigeria have greatly deteriorated, resulting to large scale poverty as population growth has out ripped the rate of food production. The existing social services, the quality of nutrition, education and health services have deteriorated. The challenge for Nigeria according to Umo, (1995) is not one of improving one sector, but to adopt growth and social services oriented programme or policies that will enable all its inhabitants to improve their welfare such policies would switch public expenditure towards those that emphasize the development of human capital, such policies could result in rapid development of social indicators and under pin the formulation of necessary policies for rapid and sustained growth. This implies the development of her human resources which invariably is human capital development.

Less developed countries (LDCs) are characterized by economic backwardness which manifests itself in low labour efficiency, limited specialization in occupation and in trade, a deficient supply of entrepreneurship and customary values and social institutions that minimize the incentives for economic change.  To remove economic backwardness and instill the capacity and motivations progress, it is necessary to increase the knowledge and skills of the people. In fact, without an improvement in the quality of human factor no progress is possible in an under developed country as Nigeria. Thus the lack of investment in human capital that has been responsible for the slow growth of less developed countries (LDCs) such as Nigeria.

1.2       Statement of the Problem

Recognition had been made of no significant economic growth by any country without adequate development of her human capital. In the past, much of the planning in Nigeria was catered on the accumulation of physical capital for rapid growth and development without recognition of the important role played by human capital in the development process. The Human Development Index provides a composite measure of three dimensions of human development, namely health, education and income; living a long and health life (measured by life expectancy), being educated (measured by adult literacy and education of primary secondary and tertiary levels) and having a decent standard of living (measured by purchasing power parity and income). Data obtained are combined into an index, on a scale of 0 – 1 with the following subdivisions; high human development (0.8-1.0), medium human development (0.5-0.7) and low human development (0.0-0.49) (UNDP, 2010).

Nigeria scored on the 2010 Global Competitiveness Index (GCI) was 3.38 which gave her a rank of 127 out of the 139 countries surveyed. Furthermore, National Average per capital income suing purchasing power parity (PPP) method, in Nigeria 2010 was a mere US $900 compare to $2,190 in Ghana and $10,290 in South Africa with the corresponding ranks of 139,157 and 74 for Nigeria, Ghana and South Africa respectively. In 2010, life expectancy in Nigeria was 48.4 years, below that of Ghana of 57.1 years South Africa at 52 years.

Public spending on social service such as education and health care that are critical to human capital development is generally low in Nigeria. the country’s budgetary allocation to education is still a far cry from the United Nation Education, Scientific and Cultural Organization (UNESCO) recommendation of 26% of the national budget which is to be spent on education by member countries. The outcome of the low spending on education is the continued decline in educational opportunities and standard in the country. The health sector in Nigeria is likewise in a state of parlous decay. Budgetary allocation to health as a proportion of the national budget fluctuated between 2.70% and 7.00% from 1999 to 2010 (Federal Ministry of Finance, 2010). The country’s health sector was ranked 191 among 201 countries surveyed by the World Health Organization (WHO) in 2010. However, it is obvious that only a healthy population can be fully productive as health care is not only health producing by also wealth producing. The foregoing is indicative that human capital in Nigeria is severely under-developed. Based on these problems, this study seeks to examine human capital as the key to Nigeria economic growth and development.

1.3       Research Questions

This study seeks to answer the following questions

  1. What is the impact of human capital development on Economic growth in Nigeria?
  2. How does human Capital Development impact on Economic Growth in Nigeria in the short Run?
  3. Does a long run relationship exist between human capital development and economic growth in Nigeria?

1.4       Objectives of the Study

The major objective of this study is to examine human capital as a key to Nigeria economic growth and development. Other secondary objective of this study will be:

  1. To examine the impact of human capital development on Economic growth in Nigeria.
  2. To examine the short run impact of human capital development on economic growth in Nigeria.
  3. To ascertain if there is a long run relationship between human capital development and economic growth in Nigeria.

1.5       Research Hypotheses

The following hypotheses were put forth for this study:

Ho: human capital development has no significant impact on economic growth in Nigeria.

Ho: human capital development has no short run impact on economic growth in in Nigeria.

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

1.6      Significance of the Study

This study is an extension of various related studies made which covers the period 1986-2016. It reveals the level of human capital investment in Nigeria, including variables as Human Capital development (which covers government financial outlays on education and health, trainings, community and social service), Labour force productivity, money supply (which covers various public policies).. It has been observed that investment in human capital contributes in numerous ways to the development of a general milieu favorable to economic progress which is even vital now that the nation is experiencing recession. Based on the above, the study is expected to provide the policy makers with effective policy guide. It will also serve as a reference material for research purposes on human capital investment and economic growth in Nigeria in order to further enhance the capability and skills her labor force.

1.7       Scope of the Study/Limitations to Study

The study is delimited to human capital development as a catalyst for Economic growth in Nigeria. It covered the period of thirty (31) years, spanning across 1986 – 2016.

This research is limited to the extent of the data used as well as other problems that posed as limitation to the effectiveness and efficiency of the entire research study.One of such limitations is inadequate finance which manifested in high transportation cost during the search for the research materials.Time also posed a limitation given the short duration of the research work.

Data sourcing and collection was not readily available due to non-documentation of data in a single document. However, efforts were made where necessary by the researcher to obtain the required information to justify the purpose of the study.

1.8     Organization of the study

The study will be divided into five chapters. Chapter one bears the Introduction, Statement of the Problem, Research Questions, Objective of the Study, Research Hypothesis, Significance of the Study and Organization of the Study. Chapter two will be divided into Theoretical and Empirical Literature, the Summary of the Literature Reviewed and Justification of the Study. Chapter three will be devoted to the Research Method. Chapter four will have as its main headings, Data Presentation, Analysis and Discussion of Findings and chapter five will contain the Summary of Findings, Conclusion and Recommendations followed by the list of Referenced Materials and the various appendixes of the study.