Home Project-material AN EMPIRICAL ANALYSIS OF HUMAN CAPITAL INVESTMENT AND ECONOMIC GROWTH IN NIGERIA.

AN EMPIRICAL ANALYSIS OF HUMAN CAPITAL INVESTMENT AND ECONOMIC GROWTH IN NIGERIA.

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Abstract

This paper analyses the relationship between investment in human capital and economic growth in Nigeria. Annual growth rates from 1981 to 2017 are used as the variables in the model. Unit root tests demonstrate that all the variables tested were non-stationary in levels, co-integration was then performed and the test for granger causality was undertaken using a Vector Error Correction Mechanism. These tests demonstrate that unidirectional causality exists, running from GDP to education and health expenditures in both the short run and the long run. Given these results, it is recommended that the Government of Nigeria increase its budgetary allocation to both the education and health sectors. In particular, more government spending should be devoted to capital expenditure on education and health in order to develop modern learning and health facilities. In addition, government should devote more money to reducing the burden of communicable diseases such as HIV, malaria and tuberculosi

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Education and health are the basic objectives of development; they are important ends in themselves. Health is central to well-being, and education is essential for 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, 2010).The Nigerian economy could be said to have enjoyed some macroeconomic stability in the recent time as its rate of economic growth averaged 2.01 percent within the last two decades. However, as a result of high and rapid growth rate of the population, per capita growth rate has remained negative and it averaged -0.852. According to World Development Indicator, (2004) with its large reserves of human and natural resources, Nigeria has the potential to build a prosperous economy, reduce poverty significantly, and provide health care services, education, and infrastructure services that its population needs. Nevertheless, despite the country’s relative oil wealth, poverty is widespread (oil revenue is only about .50c per capita), and Nigeria’s basic social indicators place it among the twenty poorest countries in the world. (World Bank, 2012) poverty, which has no geographical boundary, is seen in all part of the country, rural and urban areas inclusive. Although the incidence of poverty is much higher in the rural areas than in the urban areas. The poor are those who are unable to obtain an adequate income, find a stable job, own property or maintain healthy living conditions. They also lack adequate level of education and cannot satisfy their basic health needs. As such the poor are often illiterate, in poor health and have a short life span. (Amaghi onyeodiwe and Osinubi, 2014). Education and Health are widely accepted as leading instruments for promoting economic growth of any Nation. In Nigeria, where growth is essential to the country to climb out of poverty, education and health are particularly important. For several decades, development agencies have placed great emphasis on primary and, more recently, secondary education. But they have neglected tertiary education as a means to improve economic growth and mitigate poverty. The Dakar summit on “Education for All” in 2010, for example, advocated only for primary education as a driver of broad social welfare. It left tertiary education in background. Part of the reason for the inattention to higher education within development initiatives lays the shortage of empirical evidence that it affects economic growth and poverty reduction. After World War II, Friedman (2010) originally suggested that there was no evidence that higher education yields social benefits over and above the benefits that accrue to the students themselves. On the contrary, they hypothesized that higher education may promote social unrest and political instability. In contrast to this early view, recent evidence suggests higher education is a determinant as well as a result of income, and can produce public and private benefits. Higher education may create greater tax revenue, increase savings and investment, and lead to a more entrepreneurial and civic society. It can also improve a nation’s health, contribute to reduced population growth, improve technology, and strengthen governance. With regard to the benefit of higher education for country’s economy, many observers attribute India’s leap onto the world economic stage as stemming from its decades-long successful efforts to provide high-quality, technically oriented tertiary education to a significant number of its citizens.

Despite the tremendous progress in expanding enrolment and increasing years of schooling since 1960, Nigeria is yet to benefit from such development in-term of increased growth. Schooling in Nigeria has not delivered fully on its promise as the driver of economic success. Expanding school attainment, at the centre of most development strategies, has not guaranteed better economic conditions (Fadiya, 2015). Scholars attributed the failure of the Nigeria’s educational system to promote economic growth on the poor state of the system (Uwatt, 2002, Chete and Adeoye, 2002; Babatunde and Adefabi 2016). According to Babatunde and Adefabi (2005), the education that most Nigerians receive is not very good. Children attend primary schools which last for six years, but the education they receive there is not sufficient. The pupils to teachers ratio there was 37 to 1 and the youth literacy rate was 13% for males and 20% for females up to the late 1990s. In 2002, 33% of the relevant age group attended secondary school and only 4% attended tertiary schools. The low number of students in tertiary school can be easily explained in that spending per student in tertiary schools is 529.8% of the GNP. Furthermore, public spending on education was only 0.9% of the GNP in 2014 (World Bank, 2014).

Health comes next to education in the development of human resources. According to Yesufu (2012), a good health policy is a means by which government can at once ensure that manpower is generated in the right mix distributed in accordance with national priorities and ensure the highest level of labour productivity. Health improvement influences morbidity and labour force productivity. Thereby enhancing the process and speeding of economic development. Most developing countries have given serious attention to the provision of public health, education and social welfare services. This is because; it is believed that such measures could improve the quality of life of their people and their efficiency as productive agents thereby accelerating the general socio-economic development of their nation. Since health and education status affects the individual participation in economic activities and consequently the level of labour force in an economy, a re-examination of the level of investment in human capital and sustainable growth is highly imperative. The investment on health and education sectors according to literature should therefore improve the productivity of an economy.



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