Impact of Human Capital Development on Economic Growth in Nigeria: 1980-2016

Abstract

This study investigated the impact of human capital development on economic growth in Nigeria between 1980 and 2016. Economists believed that the development and utilization of human capital are important in a nation’s economic growth. However, the illiteracy rate in Nigeria is high and many workers are unskilled, leading to their low productivity. Hence, this
study evaluated the impact of human capital development on economic growth in Nigeria by adopting autoregressive distributed lag model (ARDL) to analyze the relationship using GDP growth rate as proxy for economic growth; total government expenditure on education (disaggregated into capital and recurrent expenditures on education) and health (disaggregated into capital and recurrent expenditures on health), domestic labour supply as proxy for human capital development. The bounds testing analysis indicated existence of cointegration between economic growth and human capital development indicators. Findings also show that human capital development indicators have positive impact on economic growth in Nigeria within the reviewed periods; however, their impacts are largely statistically insignificant. Evidence indicated that equilibrium is fully restored for any distortion in the long-run and negative relationship between human capital development and capacity utilization. Following the findings, it was recommended that stakeholders need to evolve a more pragmatic means of developing the human capabilities, and its utilization, since it is seen as an important tool for economic growth in Nigeria. Also, proper institutional framework should be put in place to look into the manpower needs of the various sectors, while advocating for more use of local content in terms of labour engagement to reduce the possibility of underutilization of domestic labour supply in Nigeria.