HUMAN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA
ABSTRACT
    The study empirically examines the relationship between human capital and economic growth in Nigeria for a period of 34 years (1981 to 2014). The development of human capital has been recognized by development economists to be an important prerequisites and an invaluable asset for a country’s socio-economic growth and development. The Ordinary Least Squared (OLS) econometric technique was employed in the analysis.
    The results from the analysis show that Federal government expenditure on education has an insignificant negative relationship with economic growth in Nigeria. Human capital, proxied by secondary school enrolment has a significant positive relation with economic growth in Nigeria. Labour force has an insignificant negative relationship with economic growth in Nigeria. Physical capital has a significant positive impact on the growth of the Nigerian economy.
    The study however, recommends among others that appropriate policies should be adopted to increase and encourage sound human capital development that will positively enhance the process of economic growth and development of Nigeria.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
Background to the Study                
Statement of the Research Problem            
Research Questions                
Hypotheses of the Study        
Significance of the Study            
Scope of the Study        
Limitation of the Study            
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction                
2.2    Concept of Human Capital        
2.3    Concept of Economic Growth         
2.4    Basic Factors in the Growth Process                
2.5    Education, Human Capital and Economic Growth            
2.6    Human Capital and the Labour Market        
2.7    Human Capital and Economic Growth            
2.8    Health, Human Capital and Economic Growth        
2.9    Theoretical Framework and Human Capital Theory         
2.9.1    Human Capital Theory            
2.9.2    The Modernization Theory                
2.9.3    The Dependence Theory                    
2.10    The Empirical Literature                    
CHAPTER THREE: METHODOLOGY OF THE STUDY
3.1    Introduction                        
3.2    Model Specification                    
3.3    Estimation Technique            
3.4      Source of Data    
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introductions                    
4.2     Unit Root Tests                
4.3     The Econometric Analysis                
CHAPTER FIVE: SUMMARYOF FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1     Summary of Findings            
    Recommendations                    
5.3    Conclusion                        
Bibliography                                    
 CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
    Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value (Wikipadia, 2014). In order word, it is a collection of resources—all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions. Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training (Wikipadia, 2014).
    The role of human capital development cannot be over emphasized. The development of human capital has been recognized by development economists to be an important prerequisite and an invaluable asset for a country’s socio-economic development. This can only be achieved through increases knowledge, skills and capabilities acquired through education and training by all the people in the country. Therefore, as the global economy shifts towards a more knowledge-based sector skills and human capital development becomes a central issue for policy-makers and practitioners engaged in economic development both at the national and regional level (OECD, 1996). Yet, the impact education and vocational training activities exert upon changing national and regional economies remains less than thoroughly explained and analyzed. Since the introduction of human capital theory in the 1960s, a number of studies have attempted to address this and related issues.
    Human capital theory views schooling and training as an investment in skills and competences (Schultz, 1960; 1961; Becker, 1964). It is argued that, based on rational expectations of returns on investment, individuals make decisions on the education and training they receive as a way of augmenting their productivity. A similar strand of studies focuses on the interaction between the educational/skill levels of the workforce and measurements of technological activity (Nelson and Phelps, 1966). According to this theory, a more educated/skilled workforce makes it easier for a firm to adopt and implement new technologies, thus reinforcing returns on education and training. Empirical studies provide evidence supporting the aggregate effects of education and training. For example, Griliches (1970) estimated that one third of the Solow (1957) residual (i.e. the portion of the output growth in the US economy that could not be attributed to the growth in labour hours or capital stock) could be accounted for by the increase in the labour force’s educational attainments. In the same vein, Denison (1979) reported the effect upon per capita income in the US, while others –including Baumol et al. (1989), Barro (1991) and Mankiw et al. (1992) – have confirmed these positive relationships through a cross-section of countries covering all levels of development.
    Bartel and Lichtenberg (1987) and Wolff (1996, 2001) found that education/skill levels are positively related with technological change in the sectors concerned. Also Crouch et al. (1999) provide a degree of evidence that highly educated workers are more likely to be employed in sectors exposed to international competition in a recent period, suggesting close association between education/skill levels of workers and technological activity undertaken. Looking at these impacts upon society as a whole, Abramovitz (1986) argues that education and vocational training is part of a set of key ingredients sustaining society’s growth, which he terms ‘social capability’.
    It is therefore hoped that within the context of the Nigerian economy, human capital development should take central stage in the government day-to day policies and programmes so as to enhance rapid socio-economic growth and development by creating and supporting the needed environment for human capital skills to contribute meaningfully to the overall growth and development of Nigeria.
1.2    STATEMENT OF THE RESEARCH PROBLEM
    Human capital refers to the abilities and skills of human resources and human capital development refers to the process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for the economic growth of the country (Harbison, 1962). Therefore, what really matters in Nigeria is the empowerment of people and the mobilization of economic surplus into productive investment channels. There is also the need for the Nigerian economy to eliminate or minimize those constraints towards human capital development so as to enhance rapid economic growth.
    The role of education in the formation of human capital in the growth process has been theoretically and empirically analyzed in the literature (Nelson and Phelps, 1966; Welch, 1970; Lucas, 1988; Romer, 1990). These literatures identified two major ways in which educational investment can contribute to economic growth. First, human capital can directly participate in production as a productive factor. In this case, the accumulation of human capital would directly generate the growth of output. This is the so- called level effect. Secondly, human capital can contribute to raising technical progress since education eases innovation, diffusion, and adoption of new technologies. In this way, the level of human capital affects productivity growth. This second effect is the so called rate effect.     
    A number of studies such as Barro and Sala-i-Martin (1992), Nonneman and Vanhoudt (1996) have tested the empirical relevance of these theories. However the evidences they provided is mixed. While most studies find positive relationship educational attainment levels and productivity growth, other studies find that the coefficient of the educational variables does not enter significantly in the growth accounting regression (Murthy and Chien, 1997). Hence, the empirical evidence suggest that human capital contribute to growth through the rate process, but there is no clear evidence on the level effect The central focus of this study therefore is to provide a new empirical conclusion on the impact of Human capital on economic growth in Nigeria. To this end, the current study proposed to analyze not only the contribution of human capital to output growth (level effect) but also the effect of education expenditure and as well as physical capital on the growth of the Nigerian economy. It is observed that previous studies have only estimated one-side effect of human capital in the growth of income (Freire-seren, 2001).
    More specifically therefore, the study seeks to provide answers to the following research questions:
What is the relationship between human capital (proxied by secondary school enrolment) and economic growth in Nigeria?
What is the relationship between education expenditure and economic growth in Nigeria?
What is the relationship between Health expenditure and economic growth in Nigeria?
What is the relationship between labour force participation and economic growth in Nigeria?
    OBJECTIVE OF THE STUDY
    The main objective of the study is to determine the impact of human capital development on the growth of the Nigerian economy. Other sub objectives are to:
Determine the relationship between education expenditure and economic growth in Nigeria.
Determine the relationship between Health expenditure and economic growth in Nigeria.
Examine the relationship between labour force participation and economic growth in Nigeria.
    HYPOTHESES OF THE STUDY
    The hypotheses of the study are:
There is no significant relationship between human capital development and economic growth in Nigeria.
There is no significant relationship between education expenditure and economic growth in Nigeria.
Health expenditure does not affect economic growth in Nigeria.
Labour force participation has no significant relationship with economic growth in Nigeria.
    SIGNIFICANCE OF THE STUDY
    This study is significant in the following respect:
First, the result from the study will provide useful information to the government and its relevant agencies in formulating appropriate policies, programmes, directives and regulations for human capital development to aid economic growth in the country.
    Secondly, it will help to re-emphasized the urgent need to harnessed all the human skills through education that will inadvertently leads to the development of the entire economy.
    The study will be very relevant to the researchers and academia as it will provide them relevant data to carry out further studies in this regard.
    Finally, the results from this study will be very useful to students of finance, management sciences and allied disciplines by providing them the needed platform to carry out further studies in the same area or similar areas.
    SCOPE OF THE STUDY
    The study will cover a period of thirty four years (1981 to 2014). Relevant data will be sourced from the Central Bank of Nigeria Statistical bulletin.
1.7    LIMITATION OF THE STUDY
    The accuracy of the data used in the study with respect to its source may not be 100 percent accurate. This alone may account for the limiting factor in the study. However, attempt will be made to ensure that the results obtained are reliable and credible for policy use.
    There is also the issue of methodological weaknesses of the study. No one single method of data analysis is all embracing nor free from methodological errors in terms of estimation and measurements parameters. We shall therefore ensure that errors are minimized so as not to render the entire results invalid and unreliable.