IMPACT OF HUMAN CAPITAL FORMATION ON ECONOMIC GROWTH IN NIGERIA
    ABSTRACT
Nomic growths were examined. The cointegration and Error Correction Methodology (ECM) were employed as the empirical strategy for estimating the relationships.
    Based on the analysis, the results show that human capital has a significant positive impact on RGDP both in the short run and in the long run. This implies that human capital development is a strong factor in maintaining sustained economic growth in the country. Government expenditure on education has a weak impact on economic growth in Nigeria: labour force participation does not have a significant impact on economic growth in Nigeria. This implies that the current level and quality of labour in the country is ineffective in stimulating steady state economic growth, and while investment in physical capital also contributes significantly to promote the rate of economic growth in the country.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background to Study            
1.2    Statement of the Problem            
1.3    Objectives of the Study                    
1.4    Hypothesis of the Study            
1.5    Scope of the Study                    
1.6    Significance of the Study                
1.7    Limitation                        
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction                     
2.2    Conceptual Issues             
2.2.1    Historical Background                
2.2.2    Human Capital Formation                
2.2.3    Economic Growth                    
2.3    Health and Education As Key Components of
Human Capital Formation                 
2.4    Empirical Literature on Human Capital
Formation and Economic Growth                
2.5    Human Capital Formation and Economic
Growth                                 
2.5.1    Theories on Human Capital Formation and
Economic Growth                    
2.5.2    Models On Human Capital Formation and
Economic  Growth             
2.6    Human Capital Formation in Nigeria         
2.7    Education in Nigeria                 
2.8    Health in Nigeria            
CHAPTER THREE: METHODOLOGY OF THE STUDY
3.1    Model Specification                
¬ 3.2    Method of Estimation and Data            
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1     Introduction                        
4.2     Unit Root Tests                        
4.3    Cointegration Test                
4.4    The Dynamic Analysis                 
4.5    The Long Run Relationship                
CHAPTER FIVE: SUMMARY OF FINGINGS, RECOMMENDATION AND CONCLUSION
5.1     Summary of Findings                        
5.2     Policy Recommendations                
5.3     Conclusion                                
    References                             
    Appendix                             
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
    Economic growth is an issue or great concern to many nations of the world today. Often times, most authors on economic growth pay little attention to the role human capital plays as a source and facilitator of economic growth. This work seeks to present a detailed analysis on the possible impact of human capital formation on economic growth in Nigeria.
    In developing country special attention should be given to human capitals formation which is generally characterized by education and health economies such as Nigeria, there are high level of unemployment, inadequate infrastructural facilities, low level of productivity and low standard of living. The main cause of this is the failure of the appropriate authority to critically evaluate, support and formulate encouraging policies on human capital formation which would foster huge investment in health and education sectors. Human capital formation of a country increases through adequate investment in health and education. The contributions of health and education as key components of human capital formation would also be explored in this research work.,
    Hence, economic growth cannot be achieved in isolation of human capital. Human capital as an economic term encompasses health, education and other human capacities that can raise productivity when increased. (Todaro and Smith, 2003).
    Human capital constitutes the most valuable resource of a country, its absence gives rise to the non performance of physical capital (tools, machinery, and equipment). Thus economic growth is hampered. There is need for adequate human capital formation owing to the fact that no significant economic growth will occur without the proper functioning of human capital. It should be noted that of all factors that contribute to economic growth, human capital serves as a yardstick in determining the manner in which all other factors should be combined to influence economic growth (Ojo, 1997).
    Investment in human capital plays an important role in increasing competitiveness improving quality of life of the population and in generating and sustaining economic growth of a country. At the present time, Nigeria wishes to be among the twenty most developed countries in the world by the year 2020. To give effect to this, one of the pre-requisites is to ensure that capable manpower is available in various areas of social, political, institutional, technological and economic endeavours which drive the process of growth, development and industrialization (Owolabi and Okwu, 2010).
    Consistent with the National Economic Empowerment and Development Strategy (NEEDS) programme of 2004, the vision 20:20 development programme and the 7-point agenda of 2007, the country’s human resources needs to be strengthen and stabilized in order to accelerate economic activities and trigged-off higher productivity, income, economic growth and development. The nation’s aspiration to be in the league of 20 leading economics in the world by year 2020- emerged from the realization that Nigeria is richly endowed with natural and human resources which all thing being equal, places her in good position to achieve this greatness. Yet, the Human Development Report of United Nations Development Programme (UNDP, 2008) shows that Nigeria is still at the low level of human development compared with countries in emerging economies. This is worrisome and posses a treat to both the long term and short term vision, agendas, as well as developmental goals.
    According to Harbison (1962), the concept of human capital formation refers to a conscious and continuous process of acquiring and increasing the number of people with the requisite knowledge, education, skills and experience that are crucial for the economic and political development of a country. The  importance of human capital in the over all national  development and the well-being of the people is certainly not a new idea it has been noted by Adam Smith in 1776, that the bases for national wealth are the skills, dexterity and competence of individuals. This conception is further given prominence by the ancient proverb. “If you are planning for a year, sow rice! For ten years, plant trees! For a hundred years, educate people!”
    It is against this background that the importance of human capital formation on economic growth cannot be overemphasized.
1.2    STATEMENT OF THE PROBLEM
    Human capital formation is one of the most important factors that contribute to rapid economic growth of a country. Unfortunately, Nigeria has experienced a steady decline in investment in human capital formation, as the importance of human capital formation over the years has been over-looked by the government. Nigeria is immensely blessed with human and natural resources that should translate to economic prosperity for the nation and her citizen. The country people (2011 estimate), large expanse of arable land, super-abundant petroleum and solid minerals as well as immeasurable forest, water and other resources. It is immense diverse resources in Nigeria, the country remains largely underdeveloped.
    Human capital is an important factor used in converting all resources to the use and benefit of mankind. Economists observed that the development and utilization of human capital is important in a nations rate in Nigeria is high and many workers are unskilled leading to their low productivity. According to Jhingan (2007), “underdeveloped countries are faced with two diverse manpower problems. They lack the critical skills needed for the industrial sector and have a surplus labour force. The existence of surplus is to a considerable extent due to the shortage of critical skills. Economists are therefore of the view that it is the lack of investment in human capital that has been responsible for the slow growth of less developed countries (LDCs). The need for investment in human capital formation in such economies is more obvious from the fact that despite the massive imports of physical capital they have not been able to accelerate their growth rates because of the existence of underdeveloped human capital. Some growth may be possible from the increase in the conventional capital even though the available labour force is enrolment average 85% while adult literacy rate was 51%. Life expectancy which was 54 years in 1960 and 5 years in 1995 has dropped to less than 50 years in 2011.
    In Nigeria, the role of education and health as they relate to human capital formation and economic growth has been underscored in many studies. Education as a key component of human capital formation is recognized as being vital in increasing the productive capacity of people. Education, especially at the higher level, contributes directly to economic growth by making individual workers more creation of knowledge, ideas and technological innovation (Larocque, 2008).
    It is against the background that having known the importance of education and health as key components of human capital formation Nigeria’s budgetary allocation to these sectors has not been encouraging. Public expenditure on education in Nigeria as a percentage of Gross National Product (GNP) was 1.5% in 1960, 1.7% for the periods of 1985 through 1987 and 0.7% in 1995, since then till 2010, if has hovered around less than 15%. This compares rather unfavourably with other developing countries. (UNDP, 2011). In recent times, the percentage of the annual federal government budget to education in Nigeria for the period 2005 – 2007 was 6.3%, 7.8% in 2005, 2006 and 2007 respectively instead of 26% as recommended by the United Nations Educational Scientific and cultural organization (UNESCO). Evidently, this is still in significant shortfall in educational investment necessary for the realization of sustainable growth and development in the country.
    The lack of capabilities such as adequate health facilities and services, broadly conceived to include all expenditures that affect the life expectancy, strength and stamina, the vigor and vitality of the people, on-the job training, formally organized education at the elementary, secondary and higher levels, study programme for adults that are not organized by firms, including extension programmes notably in agriculture, migration of individuals and families to adjust to changing job opportunities, import of technical assistance, pertise and consultants, provision of social services and  training (Jhingan, 2007).
    Nigeria aspired to obtain an adult literacy rate of 65% by 2008, which she failed to achieve, overtime, issues relating to human capital formation have remained unsolved. Issues ranging from, uneven distribution of skilled manpower, misemployment of human capital in Nigeria, poor reward system regarding the acquisition and development of human capital.
    In view of the foregoing therefore, the study seek to provide answers to the following specific research questions;
i.    What is the impact of human capital formation on economic growth in Nigeria?
ii.    Have investments in human capital formation had any impact on economic growth in Nigeria?
iii.    What are the strategies and policies that have been and can be implemented to boost human capital formation and at the same time ensure rapid and sustained economic growth in Nigeria?
iv.    How does education and health impact on human capital formation and economic growth.
1.3    OBJECTIVES OF THE STUDY
    The general objective of this study is to critically evaluate the relationship between human capital formation and economic growth in the Nigeria context.
    The specific objectives of this study are:
i.    To analyse the effects of human capital formation on economic growth in Nigeria.
ii.    To determine the impact of investment in human capital formation on economic growth in Nigeria.
iii.    To determine the impact of health and education on human capital formation.
iv.    The government in order to enhance rapid economic growth in Nigeria.
1.4    HYPOTHESIS OF THE STUDY
    The statement of hypothesis of the study seeks to establish empirically if truly relationship exists between the concepts.
1.    Hi:    Gross Capital formation impact on economic
 growth
Ho:    Gross Capital formation does not impact on
economic growth
2.    Hi:    Government’s expenditure health impact on
    economic growth.
Ho:    Government’s expenditure health does not impact
    on economic growth.
3.    Hi:    Government’s expenditure on education impacts
    on economic growth.
Ho:    Government’s expenditure on education does not
    impacts on     economic growth.
1.5    SCOPE OF THE STUDY
    This research work spans a period of 31 years (1980-2010). Various changes in human capital formation as regards health and education based programmes occurred within these years and they lend a more empirical support to this study. Moreover, the study period is chosen in order to have an unbiased analysis. In essence military and civilian rule were capture within the time scope at this research work.
1.6    SIGNIFICANCE OF THE STUDY
    This study seeks to provide a panacea to the slow rate of economic growth in Nigeria despite the enormous role played by government in facilitating economic growth and development of the country. This study is carried out to analyze the various effects of human capital formation in Nigeria’s growth process.
    Various theories have been established by various third world countries in a bid to explain the reason for experiencing low rate of economic growth. Theories such as dependency theory, modernization theory, etc have been employed in exploring this concept. They all came to the reasoning that human capital formation plays an important role in determining the growth of an economy.
    Researches on this topic carried out over the years have not recorded complete success in achieving their ultimate goal which is economic growth. Human capital formation on economic growth in Nigeria holds an unquantifiable benefit to the overall progress of the Nigerian economy, both in the short-run and also in the long-run. This research work will study the trend of expenditure on health and education in the country and how it affects economic growth. This work would also spell out its significance through broader study of expenditure class (recurrent and capital expenditures).
    In the same vein, this research work will help student of social sciences further their knowledge on the determinants of economic growth in Nigeria and at the same time the government and policy makers will find this work resourceful in formulating policies, directives that will better the lot of the country in arriving at dependable solutions to problems impeding rapid economic growth.
1.7    LIMITATION
    The limitation faced in the course of this study includes those of time, finance shortage and inconsistency with respect to errors and omission in the data available. The study also focuses its analysis solely on the Nigerian economy alone. This was as a result of time constraints, in sufficient fund.